Question

The manager of the bank where you work tells you that your bank has $10 million in excess reserves. she also tells you that the bank has $400 million in deposits and $355 million dollars in loans. given this information you find that the reserve requirement must be

a. 35/355.
b. 45/355.
c. 35/400.
d. 45/400.

Answer 1

The answer is option "c. 35/400".

This is how we calculate this;

reserve requirement = (bank deposits - loans - excess reserves) / bank deposits
=(400 - 355 - 10) / 400
= 35/400