Question

If Bank of Mateer has a required reserve ratio of 40 percent and there is $100,000 in deposits, what is the amount of required reserves? a. $40,000 b. $15,000 c. $100,000 d. $60,000 e. $0

Answer 1

Option (a) is correct.

Step-by-step explanation:

Required reserve ratio refers to the ratio that banks have to kept with their nation's central bank and the central bank uses this ratio for controlling the money supply in an economy.

Given that,

Required reserve ratio = 40 percent

Amount of deposits = $100,000

Amount of required reserves:

= 40% of Amount of deposits

= 0.4 × $100,000

= $40,000

Answer 2

Option (a) $40,000

Step-by-step explanation:

Data provided in the question:

Required reserve ratio = 40 percent

Deposits = $100,000

Now,

we know that

Required reserves = Amount of Deposits × Required Reserve ratio

or

Required reserves = $100,000 × 40%

or

Required reserves = $100,000 × 0.40

or

Required reserves = $40,000

Hence,

Option (a) $40,000