Assume that a bank receives a primary deposit of $1,000. If the reserve requirement is 25%, what will be the amount of excess reserves available for lending purposes?

Question

Quizplus · Accepted Answer

If the reserve requirement is 25%, the bank is required to hold $250 (25% of $1,000) in reserves and can lend out the remaining $750. Therefore, the amount of excess reserves available for lending purposes is $750.

Assume That a Bank Receives a Primary Deposit of $1,000