Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and one million dollars in required reserves. Given this information, we can say First National Bank has million dollars in excess reserves.

$7 million

Explanation:

Given that,

Cash = $2 million

Deposit with the Federal Reserve, Total reserves = $8 million

Required reserves = $1 million

Total reserves = Excess reserves + Required reserves

$8 million = Excess reserves + $1 million

$8 million - $1 million = Excess reserves

$7 million = Excess reserves

Therefore, the First National Bank has $7 million in excess reserves.

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