Question

Suppose the Bank of YMM has deposits of $65000 and target reserves are equal to actual reserves of $12000. What is the Bank's target reserve ratio?

Round your final answer to 2 decimal places, if necessary. Do not enter a comma "," dollar sign ($), or a percentage sign (%) while entering your answer.

Answer 1

The target reserve ratio for the Bank of YMM, calculated by dividing actual reserves of $12,000 by total deposits of $65,000, is 0.18 when rounded to two decimal places.

Step-by-step explanation:

The reserve ratio is the portion of reservable liabilities that commercial banks must hold onto, rather than lend out or invest. This is a requirement determined by the country's central bank, which in the United States is the Federal Reserve. To calculate the Bank of YMM's target reserve ratio, we divide the bank's actual reserves by its total deposits.

In this case, the bank has actual reserves of $12,000 and deposits of $65,000. Therefore, the target reserve ratio is calculated as follows: Target Reserve Ratio = Actual Reserves / Total Deposits, Target Reserve Ratio = $12,000 / $65,000, Target Reserve Ratio = 0.1846153846153846. When rounded to two decimal places, the Target Reserve Ratio is 0.18.