Consider this T-account for your bank,showing that you deposited $100 into your checking account and that your bank then made a $75 loan to Michelle. Assets
Liabilities
+$100 (cash)
+$100 (increase in your checking account)
+$75 (loan to Michelle)
+$75 (increase in Michelle's checking account)
Your bank's reserve ratio is:
A) 57.14%
B) 75%
C) 125%.
D) 42.8%.

Question

Quizplus · Accepted Answer

The correct answer is A because the reserve ratio is calculated by dividing the required reserves by the total deposits. In this case, the required reserves are $75 (100% of the loan to Michelle), and the total deposits are $100. Therefore, the reserve ratio is $75/$100 = 0.75, or 75%.

Consider This T-Account for Your Bank,showing That You Deposited $100