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the manager of the bank where you work tells you that your bank has $10 million in excess reserves. she also tells you that the bank has $500 million in deposits and $455 million in loans. given this information you find that the reserve requirement must be

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varshamittal029

The reserve ratio requirement must be 7%

Reserves= deposits-loans
              = 500-455
             = 45 million
Required reserve= reserve- excess reserve
                           = 45-10
                           = 35 million

Required reserve ratio= required reserve/deposits
                                     = 35/500
                                     = 0.07
                                     = 7%

Required reserve ratio- A required reserve ratio is the percentage of deposits that a bank is required by regulators to hold in reserves and not lend out. If the required reserve ratio is one to ten, a bank must keep $0.10 of every dollar in reserves but can lend out $0.90 of every dollar.

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