Exhibit 25-2 a Bank's Assets Consist of $1,000,000 in Total

Exhibit 25-2 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 Exhibit 25-2.If the required reserve ratio is 20 percent,what is the level of the bank's excess reserves? How much money could the excess reserves be used to create in the banking system as a result?

A) $600,000; $600,000
B) $600,000; $3,000,000
C) $400,000; $400,000
D) $400,000; $2,000,000

Correct Answer:

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