A single bank with $20,000 of reserves and a reserve ratio of 5 percent could support total transactions account balances of at most

Name: A single bank with $20,000 of reserves and a reserve ratio of 5 percent could support total transactions account balances of at most
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The reserve ratio is the fraction of deposits that a bank must hold as reserves. With a reserve ratio of 5%, the bank can support total transactions account balances of $20,000 / 0.05 = $400,000.

A Single Bank with $20,000 of Reserves and a Reserve