If a bank receiving a new deposit of $200 000 would be able,as a result,to increase its lending by,at most,$120 000,what is the desired reserve ratio?

Question

Quizplus · Accepted Answer

The desired reserve ratio is the percentage of deposits that a bank is required to hold in reserve and not lend out. In this case, the bank can increase its lending by at most $120 000, which means that it must hold $80 000 in reserve. Therefore, the desired reserve ratio is:

80 000/200 000 = 0.4 or 40%

Hence, the best choice is C) 40 percent.

If a Bank Receiving a New Deposit of $200 000