Question

Suppose the reserve requirement is 5​%. What is the effect on total checkable deposits in the economy if bank reserves increase by ​$50 ​billion? A. ​$250 billion increase B. ​$10 billion increase C. ​$50 billion increase D. ​$1 comma 000 billion increase

Answer 1

Answer:

D. ​$1 comma 000 billion increase

Explanation:

The reserve requirement ratio determines the total amount of checkable deposits a bank must keep.

In this case the reserve ratio it's 5%, which means that the total amount of deposits cannot exceed an amount equal to 20 times its reserves.  

If the reserves increase by $50 billion then $50/0,05 = 1.000 billion increase.