Asked by Blukey McDowall on May 08, 2024
Verified
A bank's reserve ratio is 7 percent and the bank has $1,000 in deposits. Its reserves amount to
A) $930.
B) $70.
C) $7.
D) $93.
Reserve Ratio
The fraction of depositors' balances that banks must have on hand as cash, a regulation enforced by central banking authorities.
Reserves
Funds or materials set aside or saved for future use or to cover unforeseen expenses; in banking, it refers to the fraction of deposits that a bank keeps in hand to ensure liquidity.
Deposits
Funds placed into an account at a financial institution for safekeeping, which can include savings accounts, checking accounts, and certificates of deposit.
- Understand the concept of reserve requirements and their role in banking and monetary policy.
Verified Answer
Learning Objectives
- Understand the concept of reserve requirements and their role in banking and monetary policy.
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