Suppose you deposit $2 000 into a bank that has a reserve ratio of 0.1. How does this initially affect the bank's balance sheet?

Question

Quizplus · Accepted Answer

When you deposit $2,000 into a bank with a reserve ratio of 0.1, it initially affects the bank's balance sheet as follows:

- Deposits rise by $2,000 (choice A)
- Required reserves rise by $200 (since the reserve ratio is 0.1, the bank must keep 10% of the deposit as reserves, which is $200) (choice B)
- Excess reserves rise by $1,800 (the remaining amount after deducting the required reserves from the deposit is $1,800) (choice C)

Therefore, all of the above choices are correct.

Suppose You Deposit $2 000 into a Bank That Has