Question

In: Economics

  If a bank that desires to hold no excess reserves and has just enough reserves...

 

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a
Selected Answer: c.

$510 increase in excess reserves and a $90 increase in required reserves.
Answers: a.

$600 increase in required reserves and no increase in excess reserves.
  b.

$600 increase in excess reserves and no increase in required reserves.
  c.

$510 increase in excess reserves and a $90 increase in required reserves.
   

Solutions

Expert Solution

Ans: $510 increase in excess reserves and a $90 increase in required reserves.

Explanation:

Required Reserve = 15% of $600 = $90

Excess reserve = $600 - $90 = $510

Excess reserves are bank reserves in excess of a reserve requirement set by a central bank. They are reserves of cash more than the required amounts.

Rahul Sunny answered 2 years ago
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