Suppose that initially a bank has excess reserves of $800 and the reserve ratio is 30%. then andy deposits $1,000 of cash into his checking account and the bank lends $600 to molly. that bank can lend an additional:
a) $100.
b) $800.
c) $900.
d) $300

excess reserves after lending  = $900

so correct option is C) $900

Explanation:

given data

reserves = $800

reserve ratio = 30%

deposits = $1,000

bank lends = $600

to find out

That bank can lend an additional

solution

first we get required reserves from new deposit that is express as

required reserves  = deposit × reserve ratio      1

put here value

required reserves  = $1000 × 30%

required reserves  = $300

and

now excess reserves from new deposits will be  

excess reserves = deposits - required reserves     2

put here value

excess reserves = $1000 - $300

excess reserves  = $700

and

total excess reserves  will be here

total excess reserves = old excess reserves + new excess reserves     3

put here value

total excess reserves =  $800 + $700

total excess reserves = $1500

so that

excess reserves after lending is here express as

excess reserves after lending  = excess reserves - amount given to Molly   4

put here value

excess reserves after lending  = $1500 - $600

excess reserves after lending  = $900

so correct option is C) $900

answer; realistic job preview;

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