Question

TABLE C

ASSETS	LIABILITIES
REQUIRED RESERVES $144,000	DEMAND DEPOSITS $3,600,000
EXCESS RESERVES ?
TOTAL RESERVES $150,000
GOVT. SECURITIES $550,000
LOANS $2,900,000
TOTAL ASSETS $3,600,000	TOTAL LIABILITIES $3,600,000

Please complete Table C.

47. If the Fed increased the reserve requirement to 9%, this bank would

A) have excess reserves of $10,000

B) have zero excess reserves

C) have a deficiency of $180,000

D) have a deficiency of $174,000

Answer 1

Answer- In table C, excess reserve will be $ 6000.

Explanation:

Total reserve = required reserve + excess reserve

$150, 000 = $144000 + excess reserve

Excess reserve = $ 150,000 - $ 144000=$6000

Answer 47. If the Fed increased the reserve requirement to 9%, this bank would:

- D. have a deficiency of $174,000

Explanation- if reserve requirement is 9 % then required reserve is : $ 36,00,000 × 9/100 =$324, 000

Reserve hold by bank is $ 150,000

Deficiency in reserve = required reserve - reserve hold by bank

= $324, 000 - $150, 000 =$174, 000