A bank has $50,000 in deposits from its checking account customers and loans of $49,000. Of the $49,000 loaned out, $43,000 remains in the checking accounts of the loan recipients. The bank has $50,000 cash on hand, and the reserve requirement is 25%. The reserve ratio for this bank is _____, and _____ meeting its reserve requirement.
A) 186%; it is not
B) 53.76%; it is
C) 0.002%; it is not
D) 20%, it is

Question

Quizplus · Accepted Answer

The reserve ratio is calculated as cash on hand divided by total deposits. The bank has $50,000 cash on hand and $50,000 in deposits, so the reserve ratio is 100%. Since the reserve requirement is 25%, the bank is meeting its reserve requirement.

A Bank Has $50,000 in Deposits from Its Checking Account