Third National Bank has reserves of $20,000 and checkable deposits of $100,000. The reserve ratio is 20 percent. Households deposit $5,000 in currency into the bank and that currency is added to reserves. Instructions: Enter your answer as a whole number. What level of excess reserves does the bank now have?

4,000

Explanation:

If $5,000 added to reserves and is a checkable deposit ...

Reserves = 25,000

checkable deposits = 105,000

Required reserve = 0.20 * 105,000

= 21,000

Actual reserves = 25,000

excess reserves = Actual reserves - Required reserve

= 25,000 - 21,000

= 4,000

Excess as percentage of required:

= (4,000 : 21,000) * 100

= 19.047% more reserves than are required.

Actual reserves as % of checkable deposits:

= (25,000 : 105,000) * 100

= 23.81%