Answer to Question #231433 in Macroeconomics for Angel

Question

Suppose that the public hold no currency.

Total reserves = R10 billion, demand deposits = R50 billion, and the required reserve ratio is 10 percent.

How large are the commercial bank’s excess reserves?

R 55 billion.

R 5 billion.

R 1 billion.

R 40 billion.

Answer 1

10% of the deposits (R50 billion) = R5 billion

Total reserves = R10 billion

thus, Total reserves -Required Reserves = bank’s excess reserves

R10 billion - R5 billion = R5 billion

R5 billion