Suppose you found $10 000 hidden under a rock and deposited it in a demand deposit account at your bank.If the desired reserve ratio was 10 percent,how much would your deposit add to total demand deposits?

Question

Quizplus · Accepted Answer

The desired reserve ratio determines the minimum amount of reserves that the bank must hold against a deposit. In this case, the desired reserve ratio is 10%. Therefore, the bank will hold $1,000 ($10,000 x 10%) as reserves and lend out the remaining $9,000. Since the deposit is in a demand deposit account, it will add $10,000 to the total demand deposits of the bank. Thus, the correct answer is B) $10,000.

Suppose You Found $10 000 Hidden Under a Rock and Deposited