Suppose again that the Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The
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Suppose again that the Third National Bank has reserves of
$20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. The bank now sells $5000 in securities to the Federal Reserve Bank in its district, receiving a $5000 increase in reserves in return. What level of excess reserves does the bank now have? Why does your answer differ (yes, it does!) from the answer to question 9?
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