Assume a bank has $5 million in deposits and $1 million in vault

Question

cash. If the bank holds $1 million in excess reserves and the required
reserves ratio is 8 percent, what level of deposits are being held?

Answer 1

$5 million x 8%= $0.4 million
$5 million- ($1 million+ $1 million + $0.4 million)= $2.6 million