Table 13-2 Refer to Table 13-2. If the reserve requirement is 10 percent, then this bank
A) is in a position to make a new loan of $15,000.
B) has less reserves than required.
C) has excess reserves of less than $15,000.
D) none of the above is correct.

Question

Table 13-2  Refer to Table 13-2. If the reserve requirement is 10 percent, then this bank
A) is in a position to make a new loan of $15,000. 
B) has less reserves than required. 
C) has excess reserves of less than $15,000. 
D) none of the above is correct.

Quizplus · Accepted Answer

The bank has total reserves of $30,000, which is 20% of its deposits. The required reserves for a deposit base of $150,000 with a reserve requirement of 10% is $15,000 (10% of $150,000). Therefore, the bank is holding excess reserves of $15,000 ($30,000 - $15,000 = $15,000), which it can use to make a new loan.