If an increase of $10 million in excess reserves increases checkable deposits in the banking system by a maximum of $100 million, the required reserve ratio would be _____

Question

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The required reserve ratio can be found by dividing the required reserves by the total checkable deposits. Since the increase in excess reserves is $10 million and this increase leads to a maximum increase of $100 million in checkable deposits, the required reserves would be 10% of $100 million, which is $10 million. Therefore, the required reserve ratio is 10%.

If an Increase of $10 Million in Excess Reserves Increases