Answered: Total reserves that a bank has at the…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Banking And The Money Supply

Section: Chapter Questions

Problem 2.3P

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Total reserves that a bank has at the Fed are $14 million. Currently the bank has excess reserves of $5 million and has made loans of $100 million. The Fed's reserve requirement for the bank is 6%. What is the maximum deposit level (in $ millions) the bank can expand to by utilizing its excess reserves? [Input your answer rounded to 1 decimal places. Just input the numerical value. You do not need to put the $ symbol or "millions" in your answer.]

Definition Definition Capital reserves held by banks or financial institutions over and above the reserves that are required to be maintained by the regulator toward its liabilities and for internal controls. For commercial banks, excess reserve is the amount over the standard reserve as decided by the central bank. These excess reserve funds are available in the form of cash and cash equivalents.

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