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Bank reserves are $250, the public holds $200 in currency, and the desired reserve-deposit ratio is 0.25. Find deposits and the money supply.
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Bank reserves are $250, the public holds $200 in currency, and the desired reserve-deposit ratio is 0.25. Find deposits and the money supply.

User Yovanny
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1 Answer

6 votes

Answer:

  • Deposits = $1,000
  • Money Supply = $1,200

Step-by-step explanation:

Deposits can be calculated by;

= Bank reserves / Reserve - deposit ratio

= 250/0.25

= $1,000

The Money Supply;

= Deposits + Money held by public

= 1,000 + 200

= $1,200

User Alexisvt
by
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