Question

Suppose the total deposits in the Last Bank of Commerce are $100,000, and $20,000 of the total deposit is set aside as reserves required by the Federal Reserve. Based on this information, the required reserve ratio is:

A. 20
B. $20,000
C.30
D.10

Answer 1

A. 20

Step-by-step explanation:

The reserve ratio= Reserve required / Total deposit × 100

= $20,000 / $100,000 * 100

= 1 / 5 *100

= 100 / 5

= 20%

The answer is A. 20

The reserve ratio also known as cash reserve is the portion of deposits that commercial banks must withhold or keep rather than lend out or invest as directed by the central bank of a country.