Please help with these questions. alculate the required reserves and excess rese
ID: 1109237 • Letter: P
Question
Please help with these questions.
alculate the required reserves and excess reserves when total reserves are $100,000, the required-reserve ratio is 10% and total checkable deposits are $800,000. 2. W hat is the required-reserve ratio if banks are required to hold $240 billion in reserves to support $1,600 billion in deposits? 3. If the required-reserve ratio is 20% and Bank A is holding $15 million in reserves, how much are Bank A's checkable deposits if excess reserves are currently equal to zero?Explanation / Answer
Part 1) We have the following information
Total Reserves
$100,000
Required Reserve Ratio
10%
Checkable Deposits
$800,00
We have to find out required reserve and excess reserve
Required reserve = (Required reserve ratio) × (Checkable deposits)
Required reserve = 0.1 × $800,000
Required reserve = $80,000
Excess reserve = Total reserve – Required reserve
Excess reserve = $100,000 – $80,000
Excess reserve = $20,000
Part 2) We have the following information
Total Reserves
$240 billion
Deposits
$1,600 billion
We have to find out required reserve ratio
We know that
Required reserve = (Required reserve ratio) × (Deposits)
So, Required reserve ratio = Required reserve/Deposits
Required reserve ratio = $240 billion/$1,600 billion
Required reserve ratio = 0.15
In other words, required reserve ratio is 15%.
Part 3) We have the following information
Total Reserves
$15 million
Required Reserve Ratio
20%
Checkable Deposits
Excess Reserve
$0
Since, excess reserve is equal to zero, so, total reserve = required reserve.
We know that; Required reserve = (Required reserve ratio) × (Checkable deposits)
Since in the present case total reserve = required reserve, so,
Total reserve = (Required reserve ratio) × (Checkable deposits)
Checkable deposits = Total reserve/Required reserve ratio
Checkable deposits = $15 million/20%
Checkable deposits = $15,000,000/0.2
Checkable deposits = $75,000,000
Total Reserves
$100,000
Required Reserve Ratio
10%
Checkable Deposits
$800,00