If $300 of new reserves generates $800 of new money in the economy,then the reserve ratio is
A)2.7 percent.
B)12.5 percent.
C)37.5 percent.
D)40 percent.

Name: If $300 of new reserves generates $800 of new money in the economy,then the reserve ratio is A)2.7 percent. B)12.5 percent. C)37.5 percent. D)40 percent.
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Quizplus · Accepted Answer

The reserve ratio is calculated as the ratio of reserves to deposits. Here, $300 of reserves generates $800 of new money, so the reserve ratio is $300/$800 = 0.375 or 37.5 percent.

If $300 of New Reserves Generates $800 of New Money