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Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets Liabilities and Net Worth (Billions of Dollars) Total reserves 4 Checkable deposits 20 Loans 11 Securities 5 Total 20 Total 20 What is the required reserve ratio

User Gyzerok
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1 Answer

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Answer:

20%

Explanation:

Given

Assets

Total reserves 4

Loans 11

Securities 5

Total 20

Liabilities and Net Worth (Billions of Dollars)

Checkable deposits 20

Total 20

Since the bank has no excess reserves then the entire reserve is required.

Reserve Ratio = Required Reserve /. Checkable Deposits

Required Reserve = Total Reserves = 4

Checkable Deposits = 20

Both in billions

Reserve Ratio = 4/20

Reserve Ratio = 0.2

Reserve Ratio = 20%

Hence,. The required ratio is calculated as 20%

User Markets
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