Question
Table 29-4
Bank of Pleasantville
Assets Liabilities
Reserves $3,000 Deposits $50,000
Loans 47,000
Refer to Table 29-4. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?
a. $250
b. $500
c. $3,600
d. $2,000
Bank of Pleasantville
Assets Liabilities
Reserves $3,000 Deposits $50,000
Loans 47,000
Refer to Table 29-4. If the Fed's reserve requirement is 5 percent, then what quantity of excess reserves does the Bank of Pleasantville now hold?
a. $250
b. $500
c. $3,600
d. $2,000
Answers
GPT-4o mini
To determine the excess reserves that the Bank of Pleasantville holds, we first need to calculate the required reserves based on the reserve requirement.
1. **Calculate Required Reserves:**
- The reserve requirement is 5% of deposits.
- Required Reserves = 5% of Deposits
- Required Reserves = 0.05 × $50,000 = $2,500
2. **Determine Excess Reserves:**
- Excess Reserves = Total Reserves - Required Reserves
- Total Reserves = $3,000 (given)
- Excess Reserves = $3,000 - $2,500 = $500
Therefore, the quantity of excess reserves that the Bank of Pleasantville now holds is **$500**.
The correct answer is **b. $500**.
1. **Calculate Required Reserves:**
- The reserve requirement is 5% of deposits.
- Required Reserves = 5% of Deposits
- Required Reserves = 0.05 × $50,000 = $2,500
2. **Determine Excess Reserves:**
- Excess Reserves = Total Reserves - Required Reserves
- Total Reserves = $3,000 (given)
- Excess Reserves = $3,000 - $2,500 = $500
Therefore, the quantity of excess reserves that the Bank of Pleasantville now holds is **$500**.
The correct answer is **b. $500**.