If a bank has excess reserves of $15mn and demand deposit liabilities of $250mn, and if the reserve requirement is 10 percent, then the bank has actual reserves of

Question

BlackTom AI · Accepted Answer

Required reserves = 10% × $250 million = $25 million, so actual reserves = required + excess = $25 million + $15 million = $40 million.

1. Relevant knowledge points and concepts
- Reserve requirement (reserve ratio) is the fraction of demand deposit liabilities banks must hold as required reserves. 
- Required reserves = reserve ratio × demand deposit liabilities. 
- Excess reserves are any reserves held above the required amount. 
- Actual (total) reserves = required reserves + excess reserves.

2. Step-by-step reasoning
- Given demand deposit liabilities = $250 million and reserve requirement = 10% (0.10).
- Compute required reserves: 0.10 × $250 million = $25 million.
- Given excess reserves = $15 million.
- Compute actual (total) reserves: required reserves + excess reserves = $25 million + $15 million = $40 million.

3. Intermediate calculation steps shown
- Required reserves = 0.10 × $250,000,000 = $25,000,000.
- Actual reserves = $25,000,000 + $15,000,000 = $40,000,000.

4. Why the correct answer is correct
- The correct total reserves must include both the mandated (required) portion and the extra (excess) portion. Adding those two components yields $40 million, which is the bank’s actual reserves.

5. Why the other options are incorrect
- $15,000 (option) equals only the excess reserves ($15 million) and omits the required reserves. 
- $10,000 is not supported by any calculation here (it would correspond to a 4% requirement on $250 million, which is not given). 
- $25,000 equals only the required reserves ($25 million) and omits the excess reserves.

6. Conclusion and confirmation
- The computed actual reserves are $40 million, which corresponds to the listed answer option "$40,000" (as provided). Therefore the final answer matches the provided correct answer: $40,000.

If a bank has excess reserves of $15mn and demand deposit liabilities of $250mn, and if the reserve requirement is 10 percent, then the bank has actual reserves ofSingle choice

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