Use the following example to answer the following questions:
Imagine that Stella deposits $25,000 in currency (which she had been storing in her closet)into her checking account at the bank.Assume that this institution has a required reserve ratio of 25 percent.
-As a result of this deposit,by how much will the bank's required reserves increase?
A) $0
B) $6,250
C) $25,000
D) $31,250
E) $100,000

Question

Quizplus · Accepted Answer

The required reserve ratio is 25%. Therefore, the bank is required to hold 25% of Stella's deposit ($25,000) as reserves. 25% of $25,000 is $6,250. So the bank's required reserves will increase by $6,250.

Use the Following Example to Answer the Following Questions