Asked by Anthony Vasquez on May 18, 2024
Verified
Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves?
Excess Reserves
Banks' reserves that exceed the minimum requirement set by a central bank, not lent out and often kept for emergency purposes.
Reserve Requirement
The minimum amount of reserves that banks must hold against deposits, as mandated by central banks.
- Review the significance of bank reserves, the functionality of the money multiplier, and the contribution of fractional reserve banking to changes in the monetary supply.
Verified Answer
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Learning Objectives
- Review the significance of bank reserves, the functionality of the money multiplier, and the contribution of fractional reserve banking to changes in the monetary supply.