Scenario 11-2 A Bank's Assets Consist of $1 000 000 in Total

question 15

Multiple Choice

Scenario 11-2
A bank's assets consist of $1 000 000 in total reserves, $2 100 000 in loans, and a building worth $1 200 000. Its liabilities and capital consist of $3 000 000 in demand deposits and $1 300 000 in capital.
-Refer to Scenario 11-2.If the bank desires to keep reserves equal to one-third of deposits,what is the level of the bank's excess reserves and how much money could the excess reserves be used to create in the banking system as a result?

• A)Excess reserves are $300 000 and could be used to create $300 000 in the banking system.
• B)Excess reserves are zero and could not be used to create any money in the banking system.
• C)Excess reserves are $700 000 and could be used to create $2 100 000 in the banking system.
• D)Excess reserves are $300 000 and could be used to create $900 000 in the banking system.

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