I'm doing economics homework and the question is asking; If a bank has $150 million in deposits and $25 million in reserves with a reserve requirement of 0.15 how much are its required reserves. I thought I was supposed to multiply the reserve requirement with the total deposits, but its telling me my answer is incorrect. What am I doing wrong?
I'm doing economics homework and the question is asking; If a bank has $150 million in deposits and $25 million in reserves with a reserve requirement of 0.15 how much are its required reserves. I thought I was supposed to multiply the reserve requirement with the total deposits, but its telling me my answer is incorrect. What am I doing wrong?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
I'm doing economics homework and the question is asking; If a bank has $150 million in deposits and $25 million in reserves with a
Expert Solution
Step 1
The amount of money that a commercial bank must keep in reserve to the amount of money it has on deposit is known as the required reserve ratio. The necessary bank reserves are held in reserve; lending or investment activities are not permitted to spend this money. It can either be deposited with a Federal Reserve bank or kept in the bank's safes.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education