Suppose a bank\'s balance sheet looks like this: Assets Liabilities Reserves Dep

Question

Suppose a bank's balance sheet looks like this: Assets                                                                 Liabilities Reserves                                                   Deposites $500 Excess        $70 Required        30 Loans           400                                                                      Total          $500                           Total                    $500 What is the required reserveratio?                Suppose a bank's balance sheet looks like this: Assets                                                                 Liabilities Reserves                                                   Deposites $500 Excess        $70 Required        30 Loans           400                                                                      Total          $500                           Total                    $500 What is the required reserveratio?               

Explanation / Answer

We can solve for the required reserve ratio (m) by using thisformula: Required Reserves = m * Total Deposits $30 = m * $500 required reserve ratio (m) = $30 / $500 required reserve ratio (m) = 0.06 (or)6%

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