Question

When $100 is deposited in the banking system, it leads to maximum expansion in bank deposits of $1,000. What is the required reserve ratio assuming that the excess reserves are 0

Answer 1

The required reserve ratio comes out to be 10% when the bank deposits are $1,000 and the reserves deposited with the central bank are $100.

What are the required reserves?

The minimum reserves that are required to be kept by the banks with the central bank are required reserves. It is one of the bank reserves that need to be maintained by banks.

Given values:

Amount of bank deposits= $1,000

Amount of reserves deposited with the central bank=$100

Computation of required reserve ratio:

$\rm\ Required \rm\ reserve \rm\ ratio=\frac{\rm\ Reserves \rm\ deposited \rm\ with \rm\ the \rm\ central \rm\ bank}{ \rm\ bank \rm\ deposits} \\\rm\ Required \rm\ reserve \rm\ ratio=\frac{\ 100}{\ 1,000} \\\rm\ Required \rm\ reserve \rm\ ratio=10\%$

Therefore, when the amount deposited with the central bank is $100 and the bank deposits are $1,000, then 10% is the required reserve ratio to be maintained.

Learn more about the required reserve ratio in the related link:

brainly.com/question/13981670

#SPJ1