Suppose a bank has a desired reserve requirement ratio of 12 percent. If someone deposits $1,000 in the bank

Question

Quizplus · Accepted Answer

With a reserve requirement of 12%, the bank must keep $120 (12% of $1000) as reserves. The rest, $880, can be considered excess reserves available for lending or other purposes. Choices B and C are incorrect because the bank cannot lend out the full $1000 deposited (it must keep 12% in reserve), and the desired reserves increase by $120, not $1000.

Suppose a Bank Has a Desired Reserve Requirement Ratio of 12