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Deposits in all financial institutions equal $2 trillion. The total reserves held by these institutions are $240 billion, $100 billion of which is in excess of reserve requirements.
a What is the percentage reserve requirements ?
b. What would the percentage reserve requirement have to be to maintain the existing amount of reserves ($240 billion) but eliminate excess reserves?
c. what would happen to deposits at all financial institutions if the existing excess reserves were eliminated? Assume that elimination of excess reserves affects deposits only
 2 years ago
 2 years ago
Deposits in all financial institutions equal $2 trillion. The total reserves held by these institutions are $240 billion, $100 billion of which is in excess of reserve requirements. a What is the percentage reserve requirements ? b. What would the percentage reserve requirement have to be to maintain the existing amount of reserves ($240 billion) but eliminate excess reserves? c. what would happen to deposits at all financial institutions if the existing excess reserves were eliminated? Assume that elimination of excess reserves affects deposits only
 2 years ago
 2 years ago

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geoffmossBest ResponseYou've already chosen the best response.0
a. Percentage excess reserve = (excess reserve required)/(total reserve). We know the required amount is $100B less than $240B, or $140B, and that the total reserve is $1000B, thus percentage excess reserve = (140B)/(1000B) = 14%
 2 years ago

geoffmossBest ResponseYou've already chosen the best response.0
b. Same formula but using 240 instead of 140: Percent excess reserve = (240B)/(1000B) = 24%
 2 years ago

geoffmossBest ResponseYou've already chosen the best response.0
c. The deposits would be locked in the financial institutions and not be able to be removed until additional deposits were made
 2 years ago

aama100Best ResponseYou've already chosen the best response.0
Thanks for trying, but the answers on the back of the book says that a. 7% b. 12% c. 1.43B
 2 years ago

BruLeeBest ResponseYou've already chosen the best response.0
a)140/2000. 140 is the reserve required, 2000 is the total amount. b)240/2000. c)No idea.
 2 years ago
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