Assuming that the reserve ratio is 10%, what amount of excess reserves are held by with the bank balance sheet listed below?
$\begin{array}{c}
\begin{array}{lr}
\text { Assets }\
\text { Reserves } &\$ 280,000 \
\text { Loans Outstanding } & \$ 2,920,000 \
\hline \text { Total } & \$ 3,200,000\
\
\
\end{array}
\begin{array}{lll}
\text { Liabilities \& Net Worth }\

\text {Checking deposits}& \$ 2,800,000\
\
\text { Net Worth }\
\text {Stockholders' Equity}& \$ 400,000\
\hline \text { Total}& \$3,200,000 \
\end{array}
\end{array}$

Question

Assuming that the reserve ratio is 10%, what amount of excess reserves are held by with the bank balance sheet listed below?
$\begin{array}{c}
\begin{array}{lr}
\text { Assets }\
\text { Reserves } &\$ 280,000  \
\text { Loans Outstanding } & \$ 2,920,000  \
\hline \text { Total } & \$ 3,200,000\
\
\
\end{array}
\begin{array}{lll}
\text { Liabilities \& Net Worth }\

\text {Checking deposits}& \$ 2,800,000\
\
\text { Net Worth }\
\text {Stockholders' Equity}& \$ 400,000\
\hline \text { Total}& \$3,200,000 \
\end{array}
\end{array}$

Quizplus · Accepted Answer

Excess reserves are the reserves held by a bank in excess of the required reserve ratio. In this case, the required reserve ratio is 10% so the bank is required to hold a minimum of $280,000 x 0.10 = $28,000 of reserves. Since the bank currently holds $280,000 in reserves, this means that they are already meeting the reserve requirement and do not have any excess reserves. Therefore, the correct answer is A) zero.

Assuming That the Reserve Ratio Is 10%, What Amount of Excess