A bank receives a demand deposit of $1,000. The bank loans out $600 of this deposit and increases its excess reserves by $300. What is the legal reserve requirement?

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The legal reserve requirement is the percentage of demand deposits that a bank must hold as reserves. In this case, the bank received a demand deposit of $1,000, loaned out $600, and increased its excess reserves by $300. This means that the bank has $1,000 in demand deposits, $600 in loans, and $300 in excess reserves. The legal reserve requirement is therefore $300/$1,000 = 0.3, or 30%.

A Bank Receives a Demand Deposit of $1,000