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23-10-2020
Business

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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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Parrain Parrain

23-10-2020

Answer:

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

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

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