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

Question

Quizplus · Accepted Answer

The desired reserve ratio is calculated by dividing the increase in desired reserves by the increase in deposits. Here, ($200,000 - $100,000) / ($2,000,000 - $1,000,000) = $100,000 / $1,000,000 = 0.10.

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