Here's a quick diagram of the format of the RAM address number:
RAM Address
Tag Block Offset
2 bits 5 bits 3 bits
+----+-------+-----+
| 00 | 00000 | 000 |
+----+-------+-----+
Using the details we are given in the example, we can also find into how many blocks our main memory is divided: because the size of a main memory block is always equal the size of any cache block, we divide the total number of bytes in main memory by the size of a cache block, thus receiving: $\frac{2^{10}}{8} = \frac{2^{10}}{2^3} = 2^{10 - 3} = 2^7 = 128$ total RAM blocks.