Working through an open-market operation Assume that the following balance sheet portrays the state of the banking system. The banks currently have no excess reserves. Assets Liabilities and Net Worth (Billions of Dollars) Total reserves 5 Checkable deposits 50 Loans 25 Securities 20 Total 50 Total 50.

What is the required reserve ratio?

A.25%

B.40%

C.5%

D.10%

Respuesta :

Answer:

10%

Explanation:

Open market operations is a measure used by central bank to expand or contract money supply in the banking system and influence interest rate by selling securities to bank or buying from bank.  

Required reserve ratio = total reserve / total checkable deposit × 100

required reserve ratio = 5 / 50 × 100 = 10%

The total required reserve ratio given the total reserves and the checkable deposits is 10%.

What is the required reserve ratio?

Reserve ratio is the percentage of deposits that is required of commercial banks to keep as reserves. The lower the ratio, the higher the increase in money supply

If the required reserve ratio is 10% and $100 is deposited, reserves would be $10 and $90 would be lent out

Required reserve ratio = reserve / total deposits

5/50 x 100 = 10%

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