Which of the following equations shows how to determine a bank's required reserves?
A) Required reserves = Excess reserves - Total reserves
B) Required reserves = Total reserves × Required reserve ratio
C) Required reserves = Deposits × Required reserve ratio
D) Required reserves = Total reserves + Excess reserves

Question

Quizplus · Accepted Answer

Required reserves are calculated by multiplying the total amount of deposits a bank has by the required reserve ratio set by the central bank or regulatory authority. This ratio determines the fraction of deposits that must be kept on hand by the bank and not lent out.

Which of the Following Equations Shows How to Determine a Bank's