Question

Suppose that Serendipity Bank has excess reserves of $14,000 and checkable deposits of $150,000.

If the reserve ratio is 20 percent, what is the size of the bank's actual reserves?

Answer 1

The size of the bank's actual reserves is $44000.

Explanation:

The bank has checkable deposits of $150,000 and it has excess reserves of $14,000.

Therefore, the required reserves = 20% of the checkable deposit

=
`(20)/(100)* 150000 = 30000` dollars. {As the reserve ratio is 20%}

Now, we know that the bank's actual reserves = The required reserves + The excess reserves

= $(30000 + 14000)

= $44000

Therefore, the size of the bank's actual reserves is $44000. (Answer)