Use the balance sheet for the following questions.
Table 29-3

-Refer to Table 29-3.If the reserve requirement is 10 percent,then this bank
A)is in a position to make a new loan of $15,000.
B)has less reserves than required.
C)has excess reserves of less than $15,000.
D)None of the above is correct.

Question

Use the balance sheet for the following questions.
Table 29-3
 
-Refer to Table 29-3.If the reserve requirement is 10 percent,then this bank
A)is in a position to make a new loan of $15,000. 
B)has less reserves than required. 
C)has excess reserves of less than $15,000. 
D)None of the above is correct.

Quizplus · Accepted Answer

The reserve requirement is 10%, so the bank must hold 10% of its deposits as reserves. If the bank has excess reserves, it means it has more reserves than the required amount. Since the bank can only lend out its excess reserves, the amount available for new loans would be less than $15,000 if the total reserves exceed the required reserves by less than $15,000.

Use the Balance Sheet for the Following Questions