Question

Suppose the banks in the Federal Reserve System have $100 billion in transactions accounts, the required reserve ratio is 0.10, and there are no excess reserves in the system. If the required reserve ratio is changed to 0.15, the deficiency of reserves would be ____

Answer 1

The correct answer is $5 billions

Step-by-step explanation:

Required reserve ratio = 0.10

Required reserve ratio (Change) = 0.15

Transactions accounts = $100 billions

Formula:

(Required reserve ratio changed - Required Reserve ratio) x transaction account.

= (0.15-0.10)*100 Billions

=0.05*100 Billions

= $ 5 Billions