4. Suppose again that Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The

Question:

4. Suppose again that Third National Bank has reserves of

$20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. The bank now sells $5,000 in securities to the Federal Reserve Bank in its district, receiving a $5,000 increase in reserves in return. What level of excess reserves does the bank now have? By what amount does your answer differ

(yes, it does!) from the answer to problem 3? LO15.3

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