Suppose an individual deposits $7,000 in a bank that has a reserve requirement of 20%. Assuming this is the only deposit in the bank, what is the liability and the excess reserve held by the bank?

The bank owes $1,400 in liabilities and holds an excess reserve of $5,600.

The bank owes $7,000 in liabilities and holds an excess reserve of $5,600.

The bank owes $7,000 in liabilities and holds an excess reserve of $1,400.

The bank owes $12,600 in liabilities and holds an excess reserve of $5,600.

The bank owes $12,600 in liabilities and holds an excess reserve of $1,400.