Question

Suppose a commercial bank has a level of target reserves of $500 million and actual reserves of $575 million. This bank's ________ is/are $75 million.

A) Profits
B) tional reserves
C) Excess reserves
D) Reserve ratio
E) Cash drain

Answer 1

The commercial bank has c) excess reserves of $75 million, which is the amount held over the required reserve level.

Step-by-step explanation:

If a commercial bank has a target level of reserves at $500 million and actually holds $575 million in reserves, the excess amount the bank holds, which is the difference between the target and actual reserves, amounts to $75 million. This excess amount is referred to as the bank's excess reserves. Excess reserves are the reserves that banks hold over and above the legal requirement set by the central bank (Federal Reserve in the United States), and they represent potential additional lending capacity for the bank.

Therefore,The correct answer is C) Excess reserves.