Question

Third national bank has reserves of $20,000 and checkable deposits of $200,000. the reserve ratio is 10 percent. households deposit $15,000 in currency into the bank and that currency is added to reserves. what level of excess reserves does the bank now have?

Answer 1

Reserves - $20,000
Checkable Deposits - $200,000
Reserves Ratio - 10
Household Deposit - $15,000
Level of Excess Reserves - ?

Solution:
Checkable Deposits = $200,000 + $15,000 = $215,000
Required Reserves = 0.10 x $215,000 = $21,500
Excess Reserves = Actual Reserves - Required Reserves
= $35,000 - $21,500 = $13,500

Answer 2

The level of excess reserves does the bank now have is $13,500.

What is the computation of excess reserves?

The reserves are said to be financial reserves that banks or any financial institute hold back themselves as per regulatory authority standards.

The ckeckable deposits would be derived by;  

$200,000 + 15,000 = 215,000$

Here, actual reserves would be;

$20,000+15,000= 35000$

Now, required reserves would be computed through;    

$0.10 * 215,000 = 21,500$

Finally, Excess Reserves would be attained when required reserves are subtracted from actual reserves;

$35,000 - 21,500 = 13,500$

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