Suppose the simplified consolidated balance sheet for the en

Suppose the simplified consolidated balance sheet for the entire commercial banking system and that all figures are in billions of dollars. The reserve ratio is 25%. Reserves $56, Securities $44 Loans 100, Checkable deposits $200

Solution

Excess reserves are bank reserves in excess of a reserve requirement set by a central bank. They are reserves of cash more than the required amounts.

The reserve ratio is 25%.

Required reserves=(25/100)(56)=14$

Excess reserves=Reserves-required reserves=56-14= 42 $

It can lend out excess reserves amount=42 $