econ question?

Question

assume the rr is 25 percent and the wiggy bank borrwos 20,00 from the fed, as a result..

the excess reserves of pigg bank are increase by
15,000 or 100,000 or 20,000 plz give reasonign to ur answer

Answer 1

Excess reserves will be increased by 15,000. Here is why.

Since the bank borrows 20,000 from the fed, the fed will place this in their reserves account. Since the bank would have to keep 25% of this in reserves already (5,000), the difference between the 20,000 and the 5,000 will be the excess reserves. This is 15,000.