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Suppose that the legal reserve ratio set by the Fed is 10% and that the Fair Bank in Fairdealing, Missouri initially has checkable deposit equal to $290 and a reserve account of $70 . A customer of Fair Bank deposits $100 into her checking account. Fair Bank loans 80% of the deposit and places the rest in its reserves at the St. Louis Fed. For simplicity, assume the borrower received the loan as cash. How much does Fair Bank have in excess reserves after the deposit and loan?

Respuesta :

Answer:

The correct answer is $51.

Explanation:

According to the scenario, computation of the given data are as follow:-

Total reserve of fair bank = 20% of $100 = $20 + $70 = $90

Total deposit = $290 + $100 = $390

Fair bank required total reserve = 10% of $390 = $39

Excess reserve = Total reserve - Required reserve

= $90 - $39

= $51

Fair bank have $51 after the deposit and loan.

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