A bank receives a demand deposit of $3,000. The bank loans out $1,800 of this deposit and increases its excess reserves by $300. What is the required reserve ratio?

Question

Quizplus · Accepted Answer

The bank loans out $1,800 of the $3,000 deposit, leaving a balance of $1,200 ($3,000 - $1,800). The excess reserves are increased by $300, so the bank's required reserves must be $900 ($1,200 - $300). To calculate the required reserve ratio, divide the required reserves by the total deposit:
$900 / $3,000 = 0.30 or 30%
Therefore, the required reserve ratio is 30%.

A Bank Receives a Demand Deposit of $3,000