Question

We know that in a closed economy with our modern two tier banking system 5 % of the money stock is cash amounting to 199 $. The ratio of outstanding loans of non bank agents at commercial banks and the outstanding loans of commercial banks at the central bank is 5 to 1. We omit banks’ retained earnings. How much $ is the reserve in this economy?

Answer 1

$5 percent =199$

$100?$

$100×199\over5$

$=38980$