Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits.Its reserves are

Name: Suppose that the reserve ratio is 5 percent and that a bank has $1,000 in deposits.Its reserves are
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The reserve ratio is given as 5%, which means that the bank is required to hold 5% of its deposits as reserves. So, the bank's required reserve balance would be 5% of $1,000, which is $50. Therefore, its reserves are $50.

Suppose That the Reserve Ratio Is 5 Percent and That