In Wellville, the money supply is $80 000 and reserves are $18 000. Assuming that people hold only deposits and no currency, and that banks hold only required reserves, what is the required reserve ratio?

Question

Quizplus · Accepted Answer

The required reserve ratio is the percentage of deposits that banks are required to hold in reserves. We can use the formula: 
Required reserve ratio = Required reserves / Deposits

Given that reserves are $18 000 and deposits are $80 000: 
Required reserve ratio = 18 000 / 80 000 = 0.225 = 22.5%

Therefore, the correct answer is B, 22.5 percent.

In Wellville, the Money Supply Is $80 000 and Reserves