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27 November, 19:55

Suppose the reserve requirement is 5 %. What is the effect on total checkable deposits in the economy if bank reserves increase by $50 billion? A. $250 billion increase B. $10 billion increase C. $50 billion increase D. $1 comma 000 billion increase

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  1. 27 November, 20:19
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    D. $1 comma 000 billion increase

    Explanation:

    The reserve requirement ratio determines the total amount of checkable deposits a bank must keep.

    In this case the reserve ratio it's 5%, which means that the total amount of deposits cannot exceed an amount equal to 20 times its reserves.

    If the reserves increase by $50 billion then $50/0,05 = 1.000 billion increase.
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