Question

The banking system receives a new cash deposit of $250,000. total deposits eventually rise by $1 million. the value of the reserve ratio is:___.

Answer 1

Cash deposit received by bank= $250,000

Total deposits= $1,000,000

The Reserve ratio will be 0.25

The amount of reservable liabilities that commercial banks must keep onto rather than lend out or invest is known as the reserve ratio. The central bank of the nation, in this case, the Federal Reserve in the United States, sets this criterion. It is often referred to as the ratio of cash reserves.

The reserve requirement, which is frequently used interchangeably with the reserve ratio, refers to the minimum amount of reserves that a bank must maintain.

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