9 March, 08:47

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

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1. 9 March, 09:56
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Reserves = \$70,000

required reserves = \$20,000

Excess Reserves = \$50,000

Explanation:

given data

demand deposits = \$200,000

outstanding loans = \$130,000

reserve requirement = 10%

to find out

Second Republic Reserves and Required Reserves and Excess Reserves

solution

we consider here 3 balance sheet

so here we get reserve that is express by demand deposit that is

demand deposit = Reserves + Outstanding Loan ... 1

\$200,000 = Reserves + \$130,000

Reserves = \$70,000

and

required reserves will be here as

required reserves = 10% of demand deposits ... 2

required reserves = 10% of \$200,000

required reserves = \$20,000

and

Excess Reserves will be here as

Excess Reserves = Total Reserves - Required Reserves ... 3

Excess Reserves = \$70,000 - \$20,000

Excess Reserves = \$50,000