6. Required and excess reserves Suppose that Second Republic Bank currently has

Question

6. Required and excess reserves

Suppose that Second Republic Bank currently has $100,000 in demand deposits and $65,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%.

Second Republic

6. Required and excess reserves

Suppose that Second Republic Bank currently has $100,000 in demand deposits and $65,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%.

Second Republic

Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)

Explanation / Answer

Reserves=35000 (100000-65000)

required reserve=10,000 (0.10x100000)

excess reserve=35000-10000=25000

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