Question

Suppose you deposit ​$2 comma 5002,500 cash into your checking account. By how much will checking deposits in the banking system increase as a result when the required reserve ratio is 0.11​0? The change in checking deposits is equal​ to: ​$nothing ​(enter your result rounded to the nearest dollar​).

Answer 1

Answer:

The change in checking deposit is equal to $22,727.27.

Explanation:

An amount of $2,500 is deposited in a checking account.

The required reserve ratio is 0.11 or 11%.

A part of this deposit will go to the required reserve and the rest will be added in the checking deposit of the bank.

The change in the checking deposits will be

= $\frac{1}{RR} \times$ amount deposited

= $\frac{1}{0.11}\times \ 2,500$

= $22,727.27