Question

Suppose a commercial bank has checkable deposits of $80,000 and the legal reserve ratio is 20 percent. If the bank's required and excess reserves are equal, then its actual reserves

Answer 1

Answer: $32000

Explanation:

The required reserves will be calculated as:

= Checkable deposit × Legal reserve ratio

= $80000 × 20%

= $16000

Excess reserves = $16000

Actual reserves will now be:

= Required reserves + Excess reserves

= $16,000 + $16,000

= $32,000