Table 16-4.
-Refer to Table 16-4. If the bank faces a reserve requirement of 20 percent, then it
A)has $10,000 of excess reserves.
B)needs $10,000 more reserves to meet its reserve requirements.
C)needs $5,000 more reserves to meet its reserve requirements.
D)just meets its reserve requirement.

Question

Table 16-4. 
-Refer to Table 16-4. If the bank faces a reserve requirement of 20 percent, then it
A)has $10,000 of excess reserves. 
B)needs $10,000 more reserves to meet its reserve requirements. 
C)needs $5,000 more reserves to meet its reserve requirements. 
D)just meets its reserve requirement.

Quizplus · Accepted Answer

The bank's total deposits are $50,000 and the reserve requirement is 20%, so the required reserves are $10,000 (20% x $50,000). The bank currently has $5,000 in reserves, so it needs $5,000 more to meet its reserve requirement.

Table 16-4. -Refer to Table 16-4. If the Bank Faces a Reserve