Suppose that from a new checkable deposit,First National Bank holds two million dollars in vault cash,eight million dollars on deposit with the Federal Reserve,and one million dollars in required reserves. Given this information,we can say First National Bank has ________ million dollars in excess reserves.

Question

Quizplus · Accepted Answer

Excess reserves are calculated by subtracting required reserves from the total reserves a bank holds. In this case, First National Bank has a total of $10 million in reserves ($2 million in vault cash + $8 million with the Federal Reserve) and $1 million in required reserves. Therefore, the bank has $9 million ($10 million - $1 million) in excess reserves.

Suppose That from a New Checkable Deposit,First National Bank Holds