Question

If excess reserves are $10 million, (total) reserves are $14 million, and the required reserve ratio is 10%, then required reserves equal ________________ and checkable deposits equal ____________________.

Answer 1

Required reserves: $1.4 million

Checkable deposits: $12.6 million

Step-by-step explanation:

Required reserves are equal to $14 million x 10% = $1.4 million.

Checkable deposits are equal to $14 million (total reserves) - $1.4 million (required reserves) = $12.6 million.

Therefore, required reserves equal $1.4 million and checkable deposits equal $12.6 million.

Here is a breakdown of the calculation:

Required reserves = Total reserves x Required reserve ratio

Checkable deposits = Total reserves - Required reserves

Required reserves = $14 million x 10% = $1.4 million

Checkable deposits = $14 million - $1.4 million = $12.6 million

Answer:

Required reserves: $1.4 million

Checkable deposits: $12.6 million