   Chapter 12.3, Problem 3ST

Chapter
Section
Textbook Problem

If excess reserves are $4 million and (total) reserves are$6 million, what do required reserves and checkable deposits equal? Assume that the required reserve ratio is 8 percent.

To determine

Identify the required reserves and the checkable deposits.

Explanation

The total reserve is the sum total of required reserves and excess reserves. Since, the total reserves is $6 million and the excess reserves is$4 million, the required reserve will be $2 million ($6$4) The required reserve can be calculated by using the following formula: Since, the required reserves is$2 and the required reserve ratio is 8% the value of checkable deposit can be calculated as follows:

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