Question

A bank has excess reserves of $6,000 and checkable deposits of $30,000 when the reserve requirement is 15 percent. If the reserve requirement is increased to 25 percent, this bank now has excess reserves of

$1,500.

$1,000.

$2,000

. $3,000.

Answer 1

Total reserves = excess reserves + required reserves.

Initially, Required reserve ratio = 15% = 0.15 => Required reserve = Required reserve ratio *Deposit = 0.15*30,000 = 4500

Thus, Total reserves = excess reserves + required reserves = 6000 + 4500 = 10500

Now, Required reserve ratio = 25% = 0.25 => Required reserve = Required reserve ratio *Deposit = 0.25*30,000 = 7500

Thus, Total reserves = excess reserves + required reserves

=> 10500 = excess reserves + 7500

=> Excess reserves = 10500 - 7500 = 3000

So, Now excess reserves = 3000

Hence, the correct answer is (d) $3,000.