Table 10-4
The following information pertains to the Bank of Moncton.
-Refer to the Table 10-4.If the Bank of Moncton has lent out all the money it can,then what is its reserve ratio?
A) 1 percent
B) 5 percent
C) 10 percent
D) 15 percent

Question

Table 10-4
The following information pertains to the Bank of Moncton. 
-Refer to the Table 10-4.If the Bank of Moncton has lent out all the money it can,then what is its reserve ratio?
A) 1 percent 
B) 5 percent 
C) 10 percent 
D) 15 percent

Quizplus · Accepted Answer

The reserve ratio is the fraction of deposits that banks keep as reserves. If the bank has lent out all the money it can, then it means that it has no excess reserves. From the table, we can see that the bank has $1000 of deposits, $900 of loans, and $90 of required reserves. This means that its total reserves are $180, which is the sum of its required reserves and any excess reserves it may have had. Since the bank has no excess reserves, its reserve ratio is calculated as $90 (required reserves) / $1000 (deposits) = 0.09, or 9 percent. Therefore, the best choice is B.

Table 10-4 The Following Information Pertains to the Bank of Moncton