If a bank has $10 million in deposits, excess reserves of $200,000, and required reserves of...
If a bank has $10 million in deposits, excess reserves of $200,000, and required reserves of $1 million,
a. what are its total reserves?
b. what is the required reserve ratio?
Homework Answers
a. Total Reserves = Required Reserves + Excess Reserves
Total Reserves = $1 million + $0.2 million
Total Reserves = $1.2 million
b. The required reserve ratio indicates the proportion of deposit that must be saved as reserves. The deposits are $10 million and the required reserves are $1 million. So,
So, the required reserve ratio is 10%.
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