Explore BrainMass

Currency-to-deposit ratio

If the currency-to-deposit ratio increases, what effect, if any, does this have on the monetary base, the money supply, total deposits, and economic growth?

Solution Preview

The response addresses the queries posted in 486 words with references.

//Before lettering about the effect of currency-to-deposit ratio, we have to first be aware of the currency-to-deposit ratio and its various aspects that bring change. So, firstly, I will write about the concept of currency-to-deposit ratio. //

It is the amount of currency that people hold relative to their deposits. In currency-deposit ratio, currency is divided by deposits. The ratio shows the behavior and preference of public in an economy. If currency-deposit ratio increases, there is a decrease in money supply. Decrease in currency deposit ratio leads to increase in money supply.

//Above, we discussed about the currency-to-deposit ratio and now as per the directions, we will discuss if the currency-to-deposit ratio increases, what effect does this ...

Solution Summary

381 words, APA