If Johnson bank has actual reserves of $200,000 and $200,000 in demand deposits with a reserve ratio is 10%, the amount of excess reserves is 180,000$.
What exactly do reserves mean?
A reserve is a portion of the company's retained earnings that is set aside to help the business meet its obligations under the law, expand, pay off debt, make investments, and other goals. Usually, this is done to prevent the money from being used for other things.
Give an example of reserve.
The money in special reserves is money that business owners set aside to cover particular debts. The most typical examples of specialized reserves include the reserve for capital redemption, reserve for debt redemption, reserve for asset replacement, and reserve for dividend equalization.
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