A Bank Has $200 of Reserves and $4,000 of Deposits

question 27

Multiple Choice

A bank has $200 of reserves and $4,000 of deposits. It is just meeting its desired reserves and has no excess reserves. Thus the desired reserve ratio is

• A) 10 per cent.
• B) 5 per cent.
• C) $200.
• D) 25 per cent.
• E) 20 per cent.

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Definitions:

Phillips, Hager & North

A Canadian investment management firm, known for its mutual funds and portfolio management services.

Canadian Equity Fund

An investment fund that concentrates on equities (stocks) based in Canada.

Escalating Rate GIC

A Guaranteed Investment Certificate (GIC) where the interest rate increases at set intervals over the term of the investment.

Compounded Annually

A method of calculating interest where the interest is added to the principal at the end of each year, leading to compound growth.