If bank reserves are 200,the public holds 400 in currency,and the desired reserve-deposit ratio is 25%,deposits are ________ and the money supply is ________.
A) 200;600
B) 400;800
C) 600;1,000
D) 800;1,200
E) 2,400;2,800

Question

Quizplus · Accepted Answer

Deposits are calculated as bank reserves divided by the reserve-deposit ratio (200 / 0.25 = 800). The money supply is the sum of deposits and currency held by the public (800 + 400 = 1,200).

If Bank Reserves Are 200,the Public Holds 400 in Currency,and