Suppose that the Bank of Oranges has excess reserves of $80,000,000 and checkable deposits of $500,000,000. If the bank has a reserve requirement of 10 percent, what is the bank's total amount of reserves? Choose one:

A. $130,000,000

B. $30,000,000

C. $580,000,000

D. $0

E. $508,000,000

Option (A) $130,000,000

Explanation:

Data provided in the question:

Excess reserves = $80,000,000

Checkable deposits = $500,000,000

Reserve requirement by the bank = 10%

Now,

The bank's total amount of reserves will be

⇒ Reserve requirement * Checkable deposits

or

= 10% * $500,000,000

= 0.10 * $500,000,000

= $50,000,000

Hence,

the total amount of reserve = Required reserve + Excess reserves

= $80,000,000 + $50,000,000

= $130,000,000

Option (A) $130,000,000