Suppose a bank has $1 million in deposits, a reserve ratio of 25 percent, and reserves of $250,000. This bank has excess reserves of:

A) $250,000.
B) $125,000.
C) $62,500.
D) $0.

ANSWER:

D
25% of 1 million = 250,000
250,000 – 250,000 = $0