A bank is currently exactly meeting its reserve requirements of 10%. If the bank has a deposit inflow of $10,000,000, what is the impact on its required reserve position?
A) It now has excess reserves in the amount of $9,000,000.
B) It now has excess reserves in the amount of $10,000,000.
C) It is now deficient $1,000,000 in required reserves.
D) It is now deficient $9,000,000 in required reserves.
E) There would be no impact on the bank's required reserves.

Question

Quizplus · Accepted Answer

The bank must hold 10% of the $10,000,000 deposit inflow as reserves, which is $1,000,000. The remaining $9,000,000 is excess reserves.

A Bank Is Currently Exactly Meeting Its Reserve Requirements of 10