A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10 percent. The excess reserves of the bank are
A) $50,000.
B) $100,000.
C) $900,000.
D) $1 million.

Question

Quizplus · Accepted Answer

The required reserves for the bank at a 10% reserve ratio would be $900,000 ($9 million x 0.10). Since the bank has actual reserves of $1 million, it has excess reserves of $100,000 ($1 million - $900,000).

A Commercial Bank Has Actual Reserves of $1 Million and Checkable-Deposit