Table 12.2 Refer to Table 12.2.If excess reserves equal $2, 000, what must the reserve requirement be equal to?

Question

Table 12.2  Refer to Table 12.2.If excess reserves equal $2, 000, what must the reserve requirement be equal to?

Quizplus · Accepted Answer

The reserve requirement can be calculated using the formula: Required reserves = Required reserve ratio x Checkable deposits. Rearranging the formula, the required reserve ratio can be calculated as: Required reserve ratio = Required reserves ÷ Checkable deposits. If excess reserves equal $2,000 and checkable deposits equal $10,000, then the required reserves must equal $8,000 ($10,000 - $2,000). Dividing $8,000 by $10,000, the required reserve ratio is 0.8 or 80%. Therefore, the reserve requirement must be equal to 15% (closest answer choice) to achieve the required reserve ratio of 80%.

Table 122 Refer to Table 12