Bank A has total deposits of $3 million and total reserves of $1 million. The required reserve ratio is 20 percent. The bank has excess reserves of
A) $20,000
B) $200,000
C) $400,000
D) $40,000
E) There is not enough information provided to answer this question
Answer
required reserves =deposits *reserve ratio
=3*0.2=$0.6 million
excess reserves =actual reserves -required reserves
=1-0.6
=0.4 million
=$400000
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