If deposits ↓ $25 million and required reserve ratio 0.1, max required reserve ratio is:
The maximum required reserve ratio is 0.1.
The required reserve ratio indicates the fraction of deposits that banks must hold as reserves. In this case, the required reserve ratio given is 0.1, which means that banks are required to keep 10% of the deposits as reserves.
This option suggests that the maximum required reserve ratio is 50%, which is incorrect. A reserve ratio of 0.5 would mean banks must hold half of their deposits as reserves, which is not supported by the given required reserve ratio of 0.1.
A reserve ratio of 25% implies that banks would need to retain a quarter of their deposits as reserves. This is not accurate based on the requirement set at 0.1, which defines a lower reserve requirement of only 10%.
This choice indicates a maximum required reserve ratio of 20%. While it is a possible reserve ratio, it exceeds the stipulated required reserve ratio of 0.1, making it an incorrect option for this scenario.
This option correctly reflects the required reserve ratio stated in the question. It signifies that banks must retain 10% of the deposits as reserves, aligning perfectly with the given information.
The required reserve ratio serves as a crucial regulation for banks, ensuring a specific proportion of deposits is held in reserve. In this instance, the maximum required reserve ratio is 0.1, indicating that banks must hold 10% of deposits as reserves. All other options incorrectly suggest ratios that are higher than the required 0.1, making them invalid in this context.
Related Questions
View allPolicy that lowers nominal interest rate:
Contraction consistent with:
Technology advance shifts SRAS and LRAS:
Spending multiplier ↑ when MPC ↑ because...
Macroville CPI 100→105; inflation rate 2013-14 is:
Related Quizzes
View allAmerican Government CLEP Cheat Sheet
CLEP College Algebra Exam Questions
CLEP College Algebra Exam Guide
CLEP College Mathematics Exam Secrets Study Guide
CLEP History of the United States II Examination Guide
CLEP History of the United States II Examination Guide
Humanities CLEP Test Study Guide
CLEP Humanities Test Questions
CLEP Introductory Psychology Examination Guide
CLEP Western Civilization I Exam Secrets Study Guide
- ✓ 500+ Practice Questions
- ✓ Detailed Explanations
- ✓ Progress Analytics
- ✓ Exam Simulations