Question

A bank has ​$200 comma 000 of checkable deposits and a required reserve ratio of 5 percent. The bank currently holds ​$190 comma 000 in reserves. How much of these reserves are excess​ reserves?

Answer 1

$180,000

Step-by-step explanation:

Reserves is the total amount of a bank's deposit that is not given out as loans

There are two types of reserves

1. required reserves
2. excess reserves

Required reserves is the percentage of deposits required of banks to keep as reserves by the central bank

Required reserves = reserve requirement x deposits

0.05 x $200,000 = $10,000

Excess reserves is the difference between reserves and required reserves

$190,000 - 10,000 = $180,000