Use the balance sheet below for the following questions.
Table 29-2

-Refer to Table 29-2. If $400 is deposited into the First Bank of Mason City, which of the following happens?
A)The bank will be able to make additional loans totalling $400.
B)Excess reserves initially increase by $400.
C)Required reserves initially increase by $8000.
D)Excess reserves initially increase by $320.

Question

Use the balance sheet below for the following questions.
Table 29-2
 
-Refer to Table 29-2. If $400 is deposited into the First Bank of Mason City, which of the following happens?
A)The bank will be able to make additional loans totalling $400. 
B)Excess reserves initially increase by $400. 
C)Required reserves initially increase by $8000. 
D)Excess reserves initially increase by $320.

Quizplus · Accepted Answer

Excess reserves initially increase by $320 because the required reserve ratio is 20%.

Use the Balance Sheet Below for the Following Questions