If a bank gets a $100 000 new deposit,chooses to lend out $75 000,and increases its excess reserves by $5000 at the same time,what is the desired reserve ratio?

Question

Quizplus · Accepted Answer

The desired reserve ratio is calculated by dividing the total reserves by the total deposits. Here, the bank keeps $25,000 in reserves ($75,000 lent out + $5,000 excess reserves = $80,000, so $100,000 - $80,000 = $20,000 in reserves). Thus, the reserve ratio is $20,000/$100,000 = 20%.

If a Bank Gets a $100 000 New Deposit,chooses to Lend