Final answer:
To find Abby's bank's actual reserves, add the required reserves ($50,000 at a 5% reserve ratio of the $1 million in deposits) to the excess reserves of $5,000, totaling $55,000.
Step-by-step explanation:
The question asks us to calculate the actual reserves of Abby's bank, given the legal reserve ratio and the excess reserves. The legal reserve ratio is 5 percent, which is the percentage of checkable deposits the bank is required to keep as reserves. With checkable deposits of 1 million dollars, the required reserves would be 5% of 1 million, which amounts to $50,000.
If the bank also has excess reserves of $5,000, the actual reserves are the sum of the required reserves and the excess reserves. Therefore, the actual reserves amount to $50,000 (required) + $5,000 (excess), which equals $55,000.