If you deposit $20,000 in cash into a demand deposit account at a bank that faces an 18 percent required reserve ratio the result will be:

Question

Quizplus · Accepted Answer

The required reserve ratio is 18%, so the bank must hold 18% of the deposit amount as reserves. Therefore, the bank will hold $3,600 ($20,000 x 0.18) as required reserves and add the remaining $16,400 to its excess reserves.

If You Deposit $20,000 in Cash into a Demand Deposit