Suppose the Fed buys $1 million of bonds from theFirst National Bank. If the First National Bank and allother banks use the resulting increase in reserves topurchase securities only and not to make loans, whatwill happen to checkable deposits?

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A: 1000*10/100 =100 1000-100=900

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Q: Thank you for your help!!!!!

A: A.(i) It is given that RRR (Required Reserve Ratio) = 8% and deposits = 200,000; therefore,Excess…

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A: Given: Given the reserve amount = $100000  Loan amount = $400000  Deposits = $500000

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A: Required reserves = Reserve ratio * Checkable deposits. = 0.10 * 100000 = $ 10,000. Excess reserves…

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.