Suppose a bank has $1 million in deposits, a reserve requirement of 10%, and bank reserves of $300,000. The bank has excess reserves of
A) $50,000.
B) $100,000.
C) $200,000.
D) $300,000.

Question

Quizplus · Accepted Answer

The reserve requirement is 10%, which means the bank must hold $100,000 in reserves (10% of $1 million in deposits). The bank currently has $300,000 in reserves, so the excess reserves are $300,000 - $100,000 = $200,000.

Suppose a Bank Has $1 Million in Deposits, a Reserve