Question

The bank plans to hold $6 for every $100 in deposits.

The bank holds excess reserves of $13,000 and desired reserves of $8,000.

What is the bank's desired reserve ratio and its actual reserves?

The bank's desired reserve ratio is ____percent.

The banks actual reserves are _____
A) Desired Reserve Ratio: 6%, Actual Reserves: $21,000
B) Desired Reserve Ratio: 8%, Actual Reserves: $21,000
C) Desired Reserve Ratio: 6%, Actual Reserves: $13,000
D) Desired Reserve Ratio: 8%, Actual Reserves: $13,000

Answer 1

the correct answer is A) The bank's desired reserve ratio is 6% and its actual reserves are $21,000.

Step-by-step explanation:

The bank's desired reserve ratio can be determined using the formula:

Desired Reserve Ratio = Desired Reserves / Deposits

In this case, the desired reserves are $8,000 and the deposits can be calculated as follows:

Deposits = Actual Reserves / (1 - Desired Reserve Ratio)

The bank's excess reserves are $13,000, so the actual reserves are:

Actual Reserves = Excess Reserves + Desired Reserves

By substituting the given values into the formulas, we can determine the bank's desired reserve ratio and actual reserves:

Desired Reserve Ratio = $8,000 / ($21,000 - $8,000) = 6%

Actual Reserves = $13,000 + $8,000 = $21,000