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

-Refer to Table 29-3. If the reserve requirement is 10 percent, what is the state of this bank?
A)It can make a new loan of $18 000.
B)It has less reserves than required.
C)It has excess reserves of less than $8000.
D)It has excess reserves of more than $8000.

Question

Use the balance sheet for the following questions.
Table 29-3
 
-Refer to Table 29-3. If the reserve requirement is 10 percent, what is the state of this bank?
A)It can make a new loan of $18 000. 
B)It has less reserves than required. 
C)It has excess reserves of less than $8000. 
D)It has excess reserves of more than $8000.

Quizplus · Accepted Answer

The bank's excess reserves are calculated by subtracting required reserves from total reserves. With a 10% reserve requirement, the bank must hold 10% of its deposits as reserves. If the bank has more reserves than required, the excess reserves will be less than $8000.

Use the Balance Sheet for the Following Questions