If reserves increase by $8 billion,what is the difference in the resulting change in checkable deposits when the required reserve ratio is 12.5 percent compared to when it is 10 percent?
A) $12.5 billion
B) $16 billion
C) $2.5 billion
D) $80 billion

Question

Quizplus · Accepted Answer

If the required reserve ratio is 12.5%, then the increase in reserves ($8 billion) will result in a maximum potential increase in checkable deposits of: 8 billion / 0.125 = $<<8/0.125=64>>64 billion If the required reserve ratio is 10%, then the increase in reserves ($8 billion) will result in a maximum potential increase in checkable deposits of: 8 billion / 0.1 = $<<8/0.1=80>>80 billion The difference between these two potential increases in checkable deposits is: 80 billion - 64 billion = $<<80-64=16>>16 billion.

If Reserves Increase by $8 Billion,what Is the Difference in the Resulting