Question

The commercial banking system has excess reserves of $200,000. Then new loans of $800,000 are subsequently made, and the system ends up just meeting its reserve requirements. The required reserve ratio must be rev: 06_06_2018 Multiple Choice 10%. 20%. 25%. 30%.

Answer 1

Answer:

25%

Explanation:

The commercial banking system has an excess reserve of $200,000

The new loans of $800,000 are paid subsequently

Therefore, the required reserve ratio can be calculated as follows

= excess reserve/ amount of loan paid

= 200,000/800,000

= 0.25×100

= 25%

Hence the required reserve ratio is 25%