M&B3 3rd Edition by Dean Croushore

Exercise 5

Consider a bank that had excess reserves of $3 million, so it made a loan of that amount to a corporation by adding $3 million to the corporation's checking account in exchange for a loan agreement in which the corporation promised to repay the $3 million plus interest over the next three years. If the reserve requirement is 10 percent, how many excess reserves does the bank now have Should it make another loan to get rid of these excess reserves Why or why not