A bank receives a demand deposit of $3000.The bank loans out $1800 of this deposit and increases its excess reserves by $300.What is the desired reserve ratio?

Question

Quizplus · Accepted Answer

The bank keeps $1200 as reserves ($3000 deposit - $1800 loaned out), and $300 of this is excess reserves. Therefore, the required reserves are $900 ($1200 - $300). The desired reserve ratio is $900/$3000 = 0.30 or 30 percent.

A Bank Receives a Demand Deposit of $3000