When Zane deposits $20,000 cash in his checkable deposit at the Citicorp and the Citicorp's desired reserves increase by $5,000,the desired reserve ratio is

Question

Quizplus · Accepted Answer

The desired reserve ratio is the ratio of the bank's required reserves to its checkable deposits. We can use the formula:

Desired reserves = Required reserves / Desired reserve ratio

Let x be the desired reserve ratio.

Then, we know that:

$5,000 = $20,000 * x

Solving for x:

x = 0.25

So the desired reserve ratio is 25 percent.

When Zane Deposits $20,000 Cash in His Checkable Deposit at the Citicorp