Question

Given a required reserve ratio of 10 percent for all banks, total bank reserves of $400 billion could support maximum deposits of?

Answer 1

Answer:

The maximum deposit is $4,000 billion.

Step-by-step explanation:

Consider the provided information.

It is given that the required reserve ratio of 10 percent for all banks.

It is given that total bank reserves of $400 billion.

Let the maximum deposit is x.

Therefore, 10% of x = $400 billion

$\frac{10}{100}\times x=\ 400\text{ billion}$

$x=\frac{100}{10}\times \ 400\text{ billion}$

$x=10\times \ 400\text{ billion}$

$x=\ 4000\text{ billion}$

Hence, the maximum deposit is $4,000 billion.