Question

Consider the following data about the economy: currency outstanding (C) = $1 trillion, total deposits (D) = $750 billion, total reserves (R) = $76 billion, and the required reserve ratio (RR ratio) = 10%. What is the currency ratio in this economy?

1) 0.10
2) 0.50
3) 0.75
4) 1.33

Answer 1

The currency ratio in this economy is calculated by dividing the currency outstanding ($1 trillion) by total deposits ($750 billion), resulting in a currency ratio of 1.33.

Step-by-step explanation:

To determine the currency ratio in an economy, we divide the currency outstanding (C) by total deposits (D). In this case, currency outstanding (C) is $1 trillion, and total deposits (D) are $750 billion. To find the currency ratio, we perform the following calculation:

Currency Ratio = C / D = $1 trillion / $750 billion = 1.33

Therefore, the currency ratio in this economy is 1.33, which corresponds to option 4.

The currency ratio in this economy can be calculated by dividing the currency outstanding (C) by the total deposits (D). In this case, the currency outstanding is $1 trillion and the total deposits are $750 billion. So, the currency ratio is:

Currency Ratio = C / D = $1 trillion / $750 billion = 1.33.

Therefore, the correct answer is 4) 1.33.