Money Market Mutual Fund Balances Held by Businesses Money Market Mutual Fund Balances Held by Individuals Currency in Banks Currency in Circulation Savings Deposits Large-denominated ($100,000 or more) Time Deposits Small-denominated ($100,000 or less) Time Deposits Checkable Deposits Refer to the table. Money supply M2 for this economy is Multiple Choice $150. $550. $ 110 230 20 70 60 190 90 80

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Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.