Suppose the Required Reserve Ratio Is 10

question 73

Multiple Choice

Suppose the required reserve ratio is 10%. If a bank has total reserves of $80,000 and checkable deposits of $550,000, what is the amount of the bank's required reserves?

• A) $25,000
• B) $55,000
• C) $80,000
• D) $135,000

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Definitions:

Disposable Income

The available cash reserves for households to spend and save once taxes on income have been settled.

Consumption

The use of goods and services by households; an economic activity that represents spending by consumers.

Average Propensity

The ratio of total consumption to total income, indicating the average tendency of consumers to spend their income.

Disposable Income

Net pay after taxes and other deductions, available for spending, saving, or investment.