Suppose you deposit $2000 into a bank that has a reserve ratio of 0.1.How does this initially affect the bank's balance sheet?
A) Reserves rise by $200.
B) Required reserves rise by $2000.
C) Deposits rise by $1000.
D) Excess reserves rise by $1800.

Question

Quizplus · Accepted Answer

When you deposit $2000, the bank's reserves increase by $2000. With a reserve ratio of 0.1, the required reserves are $200 (0.1 * $2000), leaving $1800 as excess reserves.

Suppose You Deposit $2000 into a Bank That Has a Reserve