If a bank receiving a new deposit of $200,000 would be able, as a result, to increase their lending by at most $120,000, then the required reserve ratio equals:

Question

Quizplus · Accepted Answer

The required reserve ratio is the percentage of deposits that a bank is required to hold in reserve and not lend out. If the bank can only increase lending by at most $120,000 from a deposit of $200,000, that means that $80,000 must be held in reserve. The required reserve ratio can be calculated as:

Required reserve ratio = Required reserves / Deposits
Required reserve ratio = $80,000 / $200,000
Required reserve ratio = 0.4 or 40%

Therefore, the answer is C) 40%.

If a Bank Receiving a New Deposit of $200,000 Would