Find the total amount of cash reserves

Reference no: EM1370760

Suppose the public in Nealland does not hold any cash. All commercial banks, however, hold 5 percent of their checking deposits as excess reserves, regardless of the interest rate.

Consider the balance sheet of one of several identical banks:

ASSETS LIABILITIES & NET WORTH
Reserves $ 400 Checking Deposits $2,000
Loans $1,600 Net Worth $ 0

If the total money stock (supply) is $100,000, find the total amount of cash reserves in the vaults of all banks in the economy.

Reference no: EM1370760

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