Fill in the blanks with the correct amounts. Assets LiabilitiesLoans 350 Deposits 500Bonds 75 Reserves 75 Refer to the above balance sheet (in millions of dollars) for a bank. Suppose that the bank holds an amount of reserves that is required by law. The required reserve ratio is 10 percent. The amount of deposits this bank holds at the Fed is $ million.
Question
Fill in the blanks with the correct amounts. Assets LiabilitiesLoans 350 Deposits 500Bonds 75 Reserves 75 Refer to the above balance sheet (in millions of dollars) for a bank. Suppose that the bank holds an amount of reserves that is required by law. The required reserve ratio is 10 percent. The amount of deposits this bank holds at the Fed is $ million.
Solution
The required reserve ratio is 10 percent, which means the bank is required to hold 10 percent of its deposits as reserves.
Given that the bank's deposits are 500 million dollars, the required reserves would be 10 percent of 500 million dollars, which equals 50 million dollars.
However, the bank holds 75 million dollars in reserves, which is 25 million dollars more than the required amount.
Therefore, the amount of deposits this bank holds at the Fed is 75 million dollars.
Similar Questions
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