Question

A bank has $850 million in checkable deposits. The bank has $97 million in reserves. The Federal Reserve Bank requires all banks and other depository institutions to hold a minimum marginal reserve requirement of 10 per cent of the bank's checkable deposits. The bank's required reserves and its excess reserves are are Multiple Choice $85 million $12 million 597 million: $0

Answer 1

The bank's required reserves can be calculated as 10% of its checkable deposits, which is 0.1 x $850 million = $85 million.

Its excess reserves can be calculated as the difference between its reserves and required reserves, which is $97 million - $85 million = $12 million.

Therefore, the answer is $12 million.