To Describe: The quantum of money supply for the reserve ratio.
Answer to Problem 1TY
The size of money supply for reserve ratio of
Explanation of Solution
The bank has
By using the following formula, the size of money can be calculated:
Where RR is the required reserves held by bank.
For
Therefore, the size of money supply for reserve ratio of
Similarly, for
Therefore, the size of money supply for reserve ratio of
Similarly, for
Therefore, the size of money supply for reserve ratio of
Introduction: Reserves are assets held with bank in order to cater the requirements of transactions done daily, which includes fund withdrawals, fund transfers between banks, to clear collection checks etc.
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