Question

Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves.

Assets Liabilities and Net Worth
(Billions of Dollars)
Total reserves 5 Checkable Deposits 50
Loan 25
Securities 20
Total 50 Total 50

What is the required reserve ratio?
a. 5%
b. 40%
c. 10%
d. 25%

Answer 1

Answer:

c. 10%

Explanation:

The computation of the required reserve ratio is shown below:

Required reserves ratio is

= Total reserves ÷ Checkable Deposits

= $5 ÷ $50

= 0.1

= 10%

Hence, the required reserve ratio is 10%

Therefore the correct option is c.

BY dividing the total reserves from the deposits we can get the required reserve ratio