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The Bank of Mesquite has $2 million in deposits and $550,000 in reserves. If excess reserves are equal to $150,000, the required reserve ratio is__________.

a. 15%.
b. 20%.
c. 35%.
d. 65%.

Respuesta :

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Answer:

b. 20%

Explanation:

First we have to calculate the reserves which were required by the Bank of Mesquite to be kept:

Reserves of the bank=required reserves+excess reserves

550,000=required reserves+150,000

Required reserve=$400,000

Now we have to calculate the required reserve ratio which shall be calculated as follows:

Required reserve ratio=Required reserve/deposits of the bank

                                     =400,000/2,000,000

                                     =20%

So based on the above calculations, the answer is b. 20%

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