Suppose that a bank receives a $5,000 deposit and the reserve ratio is 25%. The bank is required to keep in reserve:

Question

Quizplus · Accepted Answer

The reserve ratio is the percentage of deposits that a bank is required to keep in reserve. In this case, the reserve ratio is 25%, which means that the bank must keep 25% of the $5,000 deposit in reserve.

To calculate the required reserve amount, we can use the formula:

Required reserve = deposit * reserve ratio

Plugging in the numbers, we get:

Required reserve = $5,000 * 0.25 = $1,250

Therefore, the bank is required to keep $1,250 in reserve. The other answer choices do not accurately reflect the required reserve amount.

Suppose That a Bank Receives a $5,000 Deposit and the Reserve