Question

Required and excess reserves Suppose that Third Fidelity Bank currently has $200,000 in demand deposits and $130,000 in outstanding loans. The Federal Reserve has set the reserve requirement at 10%. Third Fidelity Reserves Required Reserves Excess Reserves (Dollars) (Dollars) (Dollars)

Answer 1

• Reserves of the third fidelity bank = $70000
• required reserves by Federal reserve = $20000
• Excess reserve = $50000

Step-by-step explanation:

it should be assumed that The components of the balance sheet would include : The liabilities, The assets and the capital

from the balance sheet

Assets = liabilities + capital

demand deposits = $200000

outstanding loan = $130000

The demand deposits = reserves + outstanding loan

$200000 = reserves + $130000 therefore the reserves would be

demand deposits - outstanding loans = Reserves from third Fidelity bank

$200000 - $130000 = $70000

Reserve required by the federal reserve from third fidelity bank at the set value of 10%

10% of demand deposits from third fidelity bank = 10% * $200000(demand deposits) = $20000

Excess reserves = Reserves - required reserve by the federal reserve bank

= $70000 - $20000

= $50000

Answer 2

The solution and complete explanation for the above question and mentioned conditions is given below in the attached document.i hope my explanation will help you in understanding this particular question.

Step-by-step explanation: