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A commercial bank has excess reserves of $5000 and a required reserve ratio of 20 percent. It makes a loan of $6000 to a borrower. The borrower writes a check for $6000 that is deposited in another commercial bank. After the check clears, the first bank will be short of reserves in the amount of:
A. $1000
B. $1200
C. $5000
D. $6000

Respuesta :

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Answer:

A. $1000

Explanation:

Consider the following formula and the calculation below.

Since the bank has excess reserve of 5000and has to make total reserve of 6000 ( 5000 + 20% * 5000 ) and it has a borrower of $6.000 it would have a reserve shortage of

6-000 - 5-000 = $1-000

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