The First National Bank of Nelsonville has no excess reserves when a new deposit of $10,000 is made. The required reserve ratio

Question

3 years ago

12

The First National Bank of Nelsonville has no excess reserves when a new deposit of $10,000 is made. The required reserve ratio

for all banks is 5 percent. How much is the largest possible increase in checking account balances throughout the entire banking system

Business

1 answer:

victus00 [196] · Answer 1 · 2022-08-20T10:15:23+03:00

Answer:

$950

Explanation:

Reserve ratio is defined as the percentage amount of deposit that a bank is instructed by the governing central bank to keep as cash reserve. This is used to control the money supply in the economy as the the check - able amount that are subjected to withdrawal is limited to the funds available after the reserve ratio has been considered.

Workings

New deposit - $10,000

Required reserve ratio - 5%

No existing excess ratio as at the time of deposit.

Reserve ratio - 5%*10000 = 50

Increase in checking account = 1000-50

= $950