Exhibit 19-7 Lower Walloon National Bank

-In Exhibit 19-7,if the required reserve ratio is 20 percent,and Mr.Brown deposits $10,000 in Lower Walloon National Bank.The Lower Walloon National bank has excess reserves of:

Question

Exhibit 19-7 Lower Walloon National Bank
 
-In Exhibit 19-7,if the required reserve ratio is 20 percent,and Mr.Brown deposits $10,000 in Lower Walloon National Bank.The Lower Walloon National bank has excess reserves of:

Quizplus · Accepted Answer

The required reserve ratio is 20%, so the bank must keep 20% of the deposit ($10,000) as reserves, which is $2,000. This means that the bank can loan out the remaining amount, which is $8,000. Since the bank has excess reserves, it means that it has more than $2,000 in reserves, so the excess reserves are $8,000. Therefore, the correct answer is B.