Table 29-5.
-Refer to Table 29-5. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will
A)have $64,000 in excess reserves.
B)have $4,000 in excess reserves.
C)be in a position to make new loans equal to $6,000
D)None of the above is correct.

Question

Table 29-5. 
-Refer to Table 29-5. Suppose the bank faces a reserve requirement of 10 percent. Starting from the situation as depicted by the T-account, a customer deposits an additional $60,000 into his account at the bank. If the bank takes no other action it will
A)have $64,000 in excess reserves. 
B)have $4,000 in excess reserves. 
C)be in a position to make new loans equal to $6,000 
D)None of the above is correct.

Quizplus · Accepted Answer

The bank must hold 10% of the $60,000 deposit as required reserves, which is $6,000. The remaining $54,000 becomes excess reserves. If the bank already had $10,000 in excess reserves, the total excess reserves would be $64,000.

Table 29-5. -Refer to Table 29-5. Suppose the Bank Faces a Reserve