-Refer to Table 10-2. If the reserve requirement is 12 percent, what is the state of this bank?
A) It can make a new loan of $17,500.
B) It has less reserves than required.
C) It has excess reserves of less than $5000.
D) It has excess reserves of more than $5000.

Question

-Refer to Table 10-2. If the reserve requirement is 12 percent, what is the state of this bank?
A) It can make a new loan of $17,500. 
B) It has less reserves than required. 
C) It has excess reserves of less than $5000. 
D) It has excess reserves of more than $5000.

Quizplus · Accepted Answer

The bank's excess reserves are calculated by subtracting required reserves (12% of deposits) from total reserves. If excess reserves are less than $5000, option C is correct.