When bank deposits increase from $1 million to $2 million, banks' required reserves increase from
$100,000 to $200,000. The required reserve ratio is .

Question

Quizplus · Accepted Answer

The required reserve ratio is calculated by dividing the required reserves ($100,000) by the deposits ($1 million) which equals 0.10 or 10%. With the increase in deposits to $2 million, the required reserves also increase by the same proportion, to $200,000. Therefore, the required reserve ratio remains the same at 10%.

When Bank Deposits Increase from $1 Million to $2 Million