Final answer:
The currency ratio is 0.44, meaning for every dollar in chequable deposits, there are 44 cents in currency. The excess reserves ratio is approximately 1.8%, which represents the unused excess reserves as a proportion of the total banking system's assets.
Step-by-step explanation:
The student is asking how to calculate the currency ratio and the excess reserves ratio given certain monetary values. To begin with, the currency ratio (C/D) can be calculated by dividing currency (C) by chequable deposits (D). With a currency (C) of $400 billion and chequable deposits (D) of $900 billion, the currency ratio is $400 billion / $900 billion, which simplifies to 4/9 or approximately 0.44, meaning for every dollar in chequable deposits, there are 44 cents in currency.Next, the desired reserves are 10% of chequable deposits, so $900 billion * 0.10 = $90 billion. Since there are $20 billion in unused excess reserves, the excess reserves ratio can be found by dividing excess reserves by total deposits. That is $20 billion / ($400 billion + $900 billion), resulting in an excess reserves ratio of approximately 0.018 or 1.8%. This percentage represents unused excess reserves as a proportion of the total banking system's assets.Conclusion: The currency ratio is approximately 0.44 and the excess reserves ratio is approximately 1.8%.