Scenario 21-2.
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi.The local unit of currency is the taz.Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves,75 million tazes of excess reserves,have issued 7,500 million tazes of deposits,and hold 225 million tazes of Tazian Treasury bonds.Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Refer to Scenario 21-2.Assume that banks desire to continue holding the same ratio of excess reserves to deposits.What is the reserve requirement and the reserve ratio for Tazian Banks?
A) 5 percent,8 percent
B) 4 percent,8 percent
C) 4 percent,5 percent
D) None of the above is correct.

Question

Quizplus · Accepted Answer

The reserve requirement is the ratio of required reserves to deposits. In this case, the required reserves are 300 million tazes and the deposits are 7,500 million tazes, so the reserve requirement is 300 / 7,500 = 0.04, or 4%. The reserve ratio is the ratio of total reserves (required reserves plus excess reserves) to deposits. In this case, the total reserves are 300 million tazes (required reserves) + 75 million tazes (excess reserves) = 375 million tazes, so the reserve ratio is 375 / 7,500 = 0.05, or 5%.

Scenario 21-2. The Monetary Policy of Tazi Is Controlled by the Country's