If the desired reserve ratio is ten percent, currency in circulation is $400 billion, chequable deposits are $800 billion, and excess reserves total $0.8 billion, then the excess reserves-chequable deposit ratio is ________.

Question

Quizplus · Accepted Answer

The excess reserves-chequable deposit ratio is calculated by dividing the excess reserves by the chequable deposits. Here, excess reserves are $0.8 billion and chequable deposits are $800 billion. Therefore, the ratio is $0.8 billion / $800 billion = 0.001.

If the Desired Reserve Ratio Is Ten Percent, Currency in Circulation