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11 December, 19:11

Consider the information for First National Bank.

If the minimum reserve ratio is 20%, what are the excess reserves available for the bank to lend?

a. $76 million

b. $8 million

c. $6 million

d. $4 million

e. $20 million.

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Answers (1)
  1. 11 December, 19:14
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    D $4 million

    Explanation:

    Bank Reserves = Bank's Deposit at Central Bank + Vault Cash.

    Bank Reserves = $15million + $5million = $20 million

    Required reserves = 20% of $80 million = $16 million.

    Bank Reserves = Required Reserves + Excess Reserves

    Excess Reserves = Bank reserves - Required reserves

    Excess Reserves = $20million - $16million = $4 million
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