Third National Bank has reserves of 20000 and checkable depo

Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $20,000 in currency into the bank and that currency is added to reserves. Instructions: Enter your answer as a whole number.

Solution

Total deposit=checkable deposits+currency deposit

=100,000+20,000=120,000.

The required reserve= 120,000x.20=24,000.

Excess reserve=24,000-20,000=$4,000.