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13 December, 04:32

Imagine that Stella deposits $25,000 in currency (which she had been storing in her closet) into her checking account at the bank. Assume that this institution has a required reserve ratio of 25 percent. As a result of this deposit, by how much will the bank's required reserves increase? a. $0 b. $31,250 c. $6,250 d. $100,000 e. $25,000

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  1. 13 December, 06:13
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    The required reserves increases by $6.250

    Explanation:

    Step 1. Given information.

    Stella deposits $25.000

    Required reserve 25%

    Step 2. Formulas needed to solve the exercise.

    Required reserves = deposits * reserve ratio

    Excess reserves = deposits - required reserves

    Step 3. Calculation.

    Required reserves = 25.000 * 0.25 = $6.250

    Excess reserves = 25.000 - 6.250 = $18.750

    Step 4. Solution.

    The required reserves are $6.250 and the excess reserves is $18.750
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