A bank that has $10,000 in excess reserves can extend new loans up to a maximum of
A) $1,000.
B) $9,000.
C) $10,000.
D) $100,000.

Question

Quizplus · Accepted Answer

Excess reserves are the amount of funds that a bank holds beyond the required reserve ratio. Since the bank has $10,000 in excess reserves, it means that it has already set aside the required reserve amount for all of its deposits. Therefore, it can extend new loans up to the full amount of its excess reserves, which is $10,000.

A Bank That Has $10,000 in Excess Reserves Can Extend