Answer to Question #252119 in Macroeconomics for Biba

Question

1. Suppose that banks hold 20 percent of deposits as reserves rather than 10 percent. Assuming that reserves are unchanged, redo the balance sheet in Table 23-7. What is the new ratio of bank deposits to reserves?

Answer 1

Let's say there were 10,000 deposits initially. Accordingly, 10% of the mandatory reserves were 1000.

20% of deposits will be 2000.

$new ratio of bank deposits to reserves=\frac{1000}{10 000-2000}=0.125$