Answer :

The excess bank reserves are $20 million.

What are bank reserves?

  • The minimal amount of cash that financial institutions must keep on hand in order to comply with central bank standards is known as bank reserves.
  • The bank must store this actual paper money in a vault on the property or in an account with the national bank.
  • A reserve requirement is the number of assets that must be held on hand to cover any withdrawals.
  • The three primary categories of bank reserves are legal, excess, and necessary.

So, the bank's excess reserves are:

  • Bank's demand deposits are $800 million.
  • The reserve requirement is 10%.

Then,

  • 800/100 × 10
  • $80 million

Excess reserves:

  • $100 - $80 = $20 million

Therefore, the excess bank reserves are $20 million.

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