Assume that the reserve requirement is 20%. A bank has $20 billion in demand deposits. How much money does the bank have to keep in reserves?
A) $2 billion
B) $4 billion
C) $10 billion
D) $20 billion

Question

Quizplus · Accepted Answer

If the reserve requirement is 20%, the bank has to keep 20% of its demand deposits as reserves. Thus, the bank has to keep $4 billion in reserves (20% of $20 billion).

Assume That the Reserve Requirement Is 20