First National Bank (FNB)has a reserve ratio of 20 percent,a required reserve ratio of 10 percent,and deposits of $1,000.If FNB receives an additional deposit of $100,
A)then it has required reserves of $210 and holds excess reserves of $10.
B)then it has required reserves of $10 and holds excess reserves of $20.
C)then it has required reserves of $110 and holds excess reserves of $190.
D)then it has required reserves of $110 and holds excess reserves of $0.

Question

Quizplus · Accepted Answer

The required reserves for the bank are 10% of the total deposits, which is $1000 x 0.10 = $100. With the additional deposit of $100, the total deposit is now $1100. Therefore, the required reserves will be $110 (10% of $1100).

The reserve ratio of the bank is 20%, which means that the bank needs to keep 20% of its deposits as reserves. So, the total reserves after the additional deposit will be $220 (20% of $1100).

The excess reserves will be the total reserves minus the required reserves, which is $220 - $110 = $110. Therefore, the bank will have required reserves of $110 and holds excess reserves of $190.

First National Bank (FNB)has a Reserve Ratio of 20 Percent,a