If the reserve ratio is 0.25, find a bank's required reserves if its deposits are $8,000,000. A....
Question:
If the reserve ratio is 0.25, find a bank's required reserves if its deposits are $8,000,000.
A. $1,000,000
B. $2,000,000
C. $4,000,000
D. $32,000,000
Required Reserves
In monetary economics, the required reserves of a bank are the funds that a commercial bank holds with the Central bank as a requirement. Holding required reserves protects the banks and depositors from bank runs.
Answer and Explanation: 1
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- The correct answer is: B. $2,000,000.
The required reserve is a fraction of the total reserves. If the required reserve ratio is 0.25, it means that...
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Required Reserve Ratio | Definition, Formula & Examples
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Chapter 54 / Lesson 3
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Learn the reserve requirement definition, the reserve ratio formula, and how to calculate required reserves. See reserve ratio examples and understand its importance.
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