Suppose a bank currently has $150,000 in deposits and $15,000 in reserves. The required reserve ratio is
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Suppose a bank currently has $150,000 in deposits and $15,000 in reserves. The required reserve ratio is 10% (so this bank holds no excess reserves). If there is a deposit outflow (i.e., someone withdraws funds from her account) for $5,000, would this bank still comply with the Fed's requirement of keeping 10% of its deposits in the form of reserves? What would be the cost for this bank to comply with this regulation if the bank decides to borrow from another bank to eliminate its reserve shortage? Assume a federal funds rate of 0.25%.
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Yes the bank would still comply with the Feds requirement of keeping 10 of its deposits in the form ...View the full answer
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Related Book For 
Financial Markets And Institutions
ISBN: 9781292215006
9th Global Edition
Authors: Stanley Eakins Frederic Mishkin
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