Question: Suppose that Econ Bank has excess reserves of $10,000 and checkable deposits of $150,000. If the reserve ratio is 25percent, what is the size of the bank's actual reserves?

Required reserve= 25% of checkable deposits

• = 25% of $150,000
• = $37,500

Actual reserve= $37,500+ 10,000 (excess reserves)

• = $47,500

Excess reserve is = $47,500 - $37,500

= $10,000

OR

The required reserves deposits *reserve ratio= 150000*0.2=30000

Actual reserves excess reserves +required reserves

=10000+30000

= $40000

The actual reserves are $40000.

Which answer is correct? I've worked through the problem twice and came up with two different answers. Can someone assist me?