If a bank has demand deposits of $160,000,reserves of $15,000 and excess reserves of $2,200,then what must its target reserve ratio be?

Question

Quizplus · Accepted Answer

The target reserve ratio is the ratio of required reserves to demand deposits. To find the required reserves, we need to subtract the excess reserves from the total reserves:

Required reserves = Total reserves - Excess reserves
Required reserves = $15,000 - $2,200
Required reserves = $12,800

Now we can calculate the target reserve ratio:

Target reserve ratio = Required reserves / Demand deposits
Target reserve ratio = $12,800 / $160,000
Target reserve ratio = 0.08 or 8%

Therefore, the answer is B) 8%.

If a Bank Has Demand Deposits of $160,000,reserves of $15,000