If a bank has $25,000 in excess reserves and the desired reserve ratio is 20 per cent, what is the maximum this bank can loan?
A) $25,000
B) $20,000
C) $5,000
D) $125,000
E) $30,000

Question

Quizplus · Accepted Answer

Excess reserves are the amount a bank has beyond what it is required to hold by the reserve ratio. If the bank has $25,000 in excess reserves, this is the maximum amount it can loan out, regardless of the reserve ratio.

If a Bank Has $25,000 in Excess Reserves and the Desired