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Complete the sentences.

The ratio of reserves to deposits that a bank plans to hold is its​ ______.
If a bank has​ $10 million in actual reserves and​ $8 million in desired​ reserves, then it has​ ______.

A. planned deposit​ ratio; a shortage of currency
B. planned reserve​ ratio; a currency drain
C. desired reserve​ ratio; unplanned reserves
D. desired deposit​ ratio; a shortage of deposits

1 Answer

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Answer:

C. Desired reserve​ ratio; unplanned reserves

Step-by-step explanation:

The ratio of reserves to deposits is usually a bank's desired reserve ratio. This is the amount the banks hold where as all the money over the reserves is usually lent or invested.

If a bank has more money than the desired reserves, these are called excess reserves or unplanned reserves. The banks have the option to invest them or use them to create credit and increase money supply.

Hope that helps.

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