A bank reports reserves of $100,000, government securities of $50,000, loans of $750,000, and checkable deposits of $900,000. The desired reserve ratio is 10 percent. What is the amount of excess reserves for this bank? Show your work
What will be an ideal response?
Excess reserves equal the actual reserves minus the desired reserves. The actual reserves are $100,000. The bank wants to keep 10 percent of its checkable deposits as reserves, so the desired reserves are ($900,000 ) × 0.10 = $90,000. So excess reserves equal $100,000 - $90,000 = $10,000.
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