Question

Calculate the currency drain ratio and the banks' reserve ratio using the information on the right.

The currency drain ratio is □ percent and the banks' reserve ratio is □ percent

In June 2014, individuals and businesses held:
▪︎ $50 billion in currency
▪︎ $1,000 billion in chequable deposits
▪︎ $5,000 billion in non-chequable deposits
▪︎ $750 billion in fixed term deposits and other deposits

In June 2014, banks held:
▪︎ $450 billion in currency
▪︎ $100 billion in reserves at the central bank
▪︎ $800 billion in loans to households and businesses

Answer 1

The currency drain ratio is 0.65% and the banks' reserve ratio is 1.29%.

Step-by-step explanation:

The currency drain ratio is calculated by dividing the amount of currency held by individuals and businesses by the total amount of deposits. In this case, the currency drain ratio is ($50 billion / $7,750 billion) * 100 = 0.65%.

The banks' reserve ratio is calculated by dividing the amount of reserves held by banks by the total amount of deposits. In this case, the banks' reserve ratio is ($100 billion / $7,750 billion) * 100 = 1.29%.