Suppose that from a new checkable deposit,First National Bank holds two million dollars in vault cash,eight million dollars on deposit with the Federal Reserve,and one million dollars in required reserves. Given this information,we can say First National Bank faces a required reserve ratio of ________ percent.

Question

Quizplus · Accepted Answer

The required reserve ratio is calculated by dividing the required reserves by the total deposits. Here, the required reserves are $1 million. The total deposits can be inferred as the sum of vault cash ($2 million) and deposits with the Federal Reserve ($8 million), totaling $10 million. Therefore, the required reserve ratio is $1 million / $10 million = 10%.

Suppose That from a New Checkable Deposit,First National Bank Holds