Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8...
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Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits? |
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Homework Answers
Solution: $4,937.5 billion
Working:
Minimum Required Reserves = Current Reserves – Excess Reserves
Minimum Required Reserves = 400 – 5 = $395
R = (Min Required Reserves) / (Total Deposits)
Total Deposits = 395 / 0.08 = $4937.5
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