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Exhibit: Reserves, Loans, and Money

-(Exhibit: Reserves, Loans, and Money) The required reserve ratio is 10%. What is the amount of Bolton Bank's excess reserves?
A) $30 million
B) $70 million
C) $100 million
D) zero

Question

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Exhibit: Reserves, Loans, and Money
 
-(Exhibit: Reserves, Loans, and Money) The required reserve ratio is 10%. What is the amount of Bolton Bank's excess reserves?
A) $30 million 
B) $70 million 
C) $100 million 
D) zero

Quizplus · Accepted Answer

Excess reserves are the amount of reserves that a bank holds above the required reserve ratio. In this case, if the required reserve ratio is 10%, then Bolton Bank would be required to hold $100 million in reserves against its $1 billion in deposits. However, the exhibit shows that the bank only has $930 million in loans and $60 million in reserves. Therefore, the amount of excess reserves would be $70 million ($100 million required reserves - $30 million actual reserves).

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