Question

If reserves increase by $12 billion, what is the difference in the resulting change in checkable deposits when the required reserve ratio is 10 percent compared to when it is 8 percent

Answer 1

$30 billion

Step-by-step explanation:

Calculation to determine the difference in the resulting change in checkable deposit

Using this formula

Difference in checkable deposit=Increase in reserve/(1* Reserve ratio 8%)-Increase in reserve/(1* Reserve ratio 10%)

Let plug in the formula

Difference in checkable deposit=$12 billion/(1*8%)-$12 billion/(1*10%)

Difference in checkable deposit=$12 billion/0.08-$12 billion/0.10

Difference in checkable deposit=$150 billion-$120 billion

Difference in checkable deposit=$30 billion

Therefore the difference in the resulting change in checkable deposit is $30 billion