Question

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 Chekable 20
Loans 11
Securities 5
Total 20 Total 20
What is the required reserve ratio?
a. 25%
b. 5%
c. 10%
d. 20%

Answer 1

20%

Step-by-step explanation:

The total reserves of banks is $4 billion

Since the banks have no excess reserves then, the total amount of required reserves is $4 billion

The checkabke deposits is $20 billion

Therefore, the required reserve ratio can be calculated as follows

Required reserve ratio= $4 billion/$20 billion

= 0.20×100

= 20%

Hence the required reserve ratio is 20%