Assume the public in Nealland does not hold any cash. All commercial banks, however, hold 5% 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.
This posting offers help with calculating required reserve ratio.