The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 10 percent, how much is the bank holding in excess reserves?
A)$15 million
B)$19.5 million
C)$25.5 million
D)$30 million

Question

Quizplus · Accepted Answer

The bank is required to hold 10% of its deposits in reserve, which is $30 million (0.10 x $300 million). Since the bank has $255 million in loans, it has $45 million in excess reserves ($300 million - $255 million - $30 million).

The Manager of the Bank Where You Work Tells You