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9 February, 10:49

Assume that a bank holds 3 million dollars in vault cash, 9 million dollars on deposit with the Federal Reserve, and 2 million dollars in required reserves. What is the level of excess reserves?

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  1. 9 February, 11:05
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    The amount or the level of excess reserves is $11 million

    Explanation:

    The formula to compute the excess reserve level is as:

    Excess reserve = Deposit with Federal Reserve (Legal Reserve) + Required reserve

    where

    Deposit with Federal Reserve is 9 million dollars

    Required reserve is 2 million dollars

    Putting the Values above:

    Excess Reserve = $9 million + $2 million

    = $11 million
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