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If Banks Desire to Hold No Excess Reserves,the Reserve Ratio

Question 196

Multiple Choice

If banks desire to hold no excess reserves,the reserve ratio is 10 percent,and a bank that was previously just meeting its reserve requirement receives a new deposit of $400,then initially the bank has a


A) $400 increase in excess reserves and no increase in required reserves.
B) $400 increase in required reserves and no increase in excess reserves.
C) $360 increase in excess reserves and $40 increase in required reserves.
D) $40 increase in excess reserves and $360 increase in required reserves.

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