Question

Let’s suppose that a bank has $600 million in total deposits. This bank is subject to a 20% required reserve ratio and has $100 million in reserves. Which of the following statements is correct?

Choose one:
A. The bank has insufficient reserves. It needs an additional $20 million to meet the reserve requirement.
B. The bank has no excess reserves.
C. The bank has insufficient reserves. It needs an additional $480 million to meet the reserve requirement.
D. The bank has $20 million in excess reserves.
E. The bank has $100 million in excess reserves.

Answer 1

The answer and procedures of the exercise are attached in the image.

Explanation

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