If a bank receiving a new deposit of $200 000 would be able,as a result,to increase its lending by,at most,$150 000,what is the desired reserve ratio?

Question

Quizplus · Accepted Answer

The desired reserve ratio can be calculated by dividing the maximum increase in lending by the new deposit. 
Maximum increase in lending = $150 000
New deposit = $200 000
Desired reserve ratio = Maximum increase in lending / New deposit
= $150 000 / $200 000
= 0.75
= 75 percent

However, since the reserve ratio cannot exceed 100 percent, the maximum desired reserve ratio would be 25 percent (1-0.75). Therefore, the correct answer is B) 25 percent.

If a Bank Receiving a New Deposit of $200 000