Suppose that a country has $50 billion in bank reserves, $100 billion in currency held by the public, and $500 billion in bank deposits. The currency drain ratio is
A)18%.
B)50%.
C)30%.
D)10%.
E)20%.

Question

Quizplus · Accepted Answer

The currency drain ratio is calculated as the ratio of currency held by the public to the total amount of money in the economy (currency held by the public plus bank deposits). Here, it is $100 billion / ($100 billion + $500 billion) = 1/6 = 16.67%, which is closest to 20%.

Suppose That a Country Has $50 Billion in Bank Reserves