Answer to Question #137749 in Macroeconomics for martina

Question

Third National Bank has reserves of $10,000 and checkable deposits of $100,000. The reserve ratio is 10 percent. Households deposit $15,000 in currency into the bank, and the bank adds that currency to its reserves. What amount of excess reserves does the bank now have?

Answer 1

Check able deposits=$100000+$15000=$115000

Required reserves=reserve ratio*check able deposits

Required reserves=10%*$115000=$11500

Excess reserves= actual reserves-required reserves

Excess reserves=($10000+$15000)-$11500

Excess reserves=$25000-$11500

Excess reserves=$13500