Respuesta :
The question is incomplete! Complete question along with answer and explanation is provided below.
Question:
Suppose first main street bank, second republic bank, and third fidelity bank all have zero excess reserves. the required reserve ratio is 20%. the federal reserve buys a government bond worth $1,500,000 from gilberto, a customer of first main street bank. he deposits the money into his checking account at first main street bank.
Complete the following table to show the effect of a new deposit on excess and required reserves when the required reserve ratio is 20%.
Amount Deposited | Excess Reserves | Required Reserves
Given Information:
Deposit amount = $1,500,000
Required Reserve Ratio = 20%
Required Information:
Required Reserves = ?
Excess Reserves = ?
Answer:
Required Reserves = $300,000
Excess Reserves = $1,200,000
Explanation:
The required reserves are calculated using
Required Reserves = Deposit Amount x Required Reserve Ratio
Required Reserves = $1,500,000 x 0.20
Required Reserves = $300,000
The excess reserves are calculated using
Excess Reserves = Deposit Amount - Required Reserves
Excess Reserves = $1,500,000 - $300,000
Excess Reserves = $1,200,000
The bank can use these excess reserves to make loans.
Amount Deposited | Excess Reserves | Required Reserves
$1,500,000 | $1,200,000 | $300,000
