In Smallville,the money supply is $8 million and reserves are $1 million.Assuming that people hold only deposits and no currency,and that banks hold only required reserves,the required reserve ratio is

Question

Quizplus · Accepted Answer

The required reserve ratio can be calculated as follows:
Required Reserves = Reserve Ratio x Deposits
$1 million = Reserve Ratio x $8 million
Reserve Ratio = $1 million / $8 million
Reserve Ratio = 0.125 or 12.5%
Therefore, the best choice is B) 12.5%.

In Smallville,the Money Supply Is $8 Million and Reserves Are