Table 16-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below.
-Refer to Table 16-2. The bank's reserve ratio is
A)7.50 percent.
B)8.12 percent.
C)92.50 percent.
D)100 percent.

Question

Table 16-2. An economy starts with $10,000 in currency. All of this currency is deposited into a single bank, and the bank then makes loans totaling $9,250. The T-account of the bank is shown below. 
-Refer to Table 16-2. The bank's reserve ratio is
A)7.50 percent. 
B)8.12 percent. 
C)92.50 percent. 
D)100 percent.

Quizplus · Accepted Answer

The reserve ratio is the portion of deposits that banks must hold on reserve and cannot lend out. In this case, the bank made loans of $9,250 after receiving deposits of $10,000. Thus, the bank is holding $750 in reserves ($10,000 - $9,250 = $750). The reserve ratio is calculated by dividing reserves by deposits: $750/$10,000 = 0.075 or 7.5%. Therefore, the answer is A) 7.50 percent.