Question

A single commercial bank in a multibank banking system can lend only an amount equal to its initial preloan ___________.a. Total reserves.

b. Excess reserves.
c. Total deposits.
d. Excess deposits.

Answer 1

b. Excess reserves.

Step-by-step explanation:

Excess reserves also known as the secondary excess amount of capital reserves held by a bank or financial institution which is in excess to the amount of capital required by creditors, regulators or for the internal controls.

Central banking authorities set the standard reserve requirement for the commercial banks.

The excess reserves are measured against these standard reserve set for the commercial banks.