A new bank has vault cash of $1 million and $5 million in deposits held at its Federal Reserve District Bank.
a. If the required reserves ratio is 8 percent, what dollar amount of deposits can the bank have?
b. If the bank holds $65 million in deposits and currently holds bank reserves such that excess reserves are zero, what required reserves ratio is implied?
2. Assume a bank has $5 million in deposits and $1 million in vault cash. If the bank holds $1 million in excess reserves and the required reserves ratio is 8 percent, what level of deposits are being held?
3. A bank has $110 million in deposits and holds $10 million in vault cash.
a. If the required reserves ratio is 10 percent, what dollar amount of reserves must be held at the Federal Reserve Bank?
b. How would your answer in Part (a) change if the required reserves ratio was increased to 12 percent?