In September 2008, Regions Bank has $89 million in M1 deposits, $3 million in reserves and $81 million in loans. Regions Bank's desired reserve ratio is

Question

Quizplus · Accepted Answer

The desired reserve ratio is the percentage of deposits that a bank desires to hold in reserves. We can calculate the desired reserve ratio using the formula:
Desired Reserve Ratio = Reserves / Deposits

In this case, Regions Bank has $89 million in M1 deposits and $3 million in reserves. Hence, its desired reserve ratio is:
Desired Reserve Ratio = $3 million / $89 million = 0.0337 = 3.37%

However, the answer choices are all in percentage points, so we need to convert this to a percentage by multiplying by 100:
Desired Reserve Ratio = 3.37% ≈ 3.4%

Therefore, the best choice is D, 3.4 percent.

In September 2008, Regions Bank Has $89 Million in M1