Question

Hypothetical Country has $120 in currency, $280 in reserves, and $900 in deposits. There are no excess reserves. Use this information to answer the questions. Enter your answers in decimal form rounded to two decimal places. Calculate the money multiplier. money multiplier: Calculate the reserve ratio. reserve ratio: Calculate the currency drain ratio. currency drain ratio:

Answer 1

Answer:

Reserve ratio = 31.11%

Currency drain ratio = 13.33%.

Explanation:

Reserve ratio = Reserves/Deposits = $280/$900 =  0.3111, or 31.11%

Currency drain ratio = Currency/Deposits = $120/$900 = 0.1333, or 13.33%

Therefore, reserve ratio is 31.11%, and currency drain ratio is 13.33%.