If the desired reserve ratio is 3 percent and deposits are $5.75 billion, banks hold
A)$0.1725 million in excess reserves.
B)$192 million in reserves.
C)$0.1725 million in reserves.
D)$172.5 million in excess reserves.
E)$172.5 million in reserves.

Question

Quizplus · Accepted Answer

To find the required reserves, we multiply the deposits by the desired reserve ratio:
$5.75 billion x 0.03 = $172.5 million.
Therefore, banks hold $172.5 million in reserves.

If the Desired Reserve Ratio Is 3 Percent and Deposits