required reserve ratio
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Assume the public in Nealland does not hold any cash. All commercial banks, however, hold 5% of their checking deposits as excess reserves, regardless of the interest rate.
Consider the balance sheet of one of several identical banks:
ASSETS LIABILITIES & NET WORTH
Reserves $ 400 Checking Deposits $2,000
Loans $1,600 Net Worth $ 0
If the total money stock (supply) is $100,000, find the total amount of cash reserves in the vaults of all banks in the economy.
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This posting offers help with calculating required reserve ratio.
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- MBA, Indian Institute of Finance
- Bsc, Madras University
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