Question

Find the missing figures and choose the correct option: \[ \begin{array}{|c|c|c|c|} \hline \textbf{Round} & \textbf{Deposits} & \textbf{Loans (80\%)} & \textbf{Reserve Ratio (20\%)} \\ \hline I & 5000 & 4000 & \_\_\_ \\ II & 4000 & \_\_\_ & 800 \\ \vdots & \vdots & \vdots & \vdots \\ \hline \textbf{Total} & \_\_\_ & \_\_\_ & \_\_\_ \\ \hline \end{array} \]

• A. 1000, 800, 20000, 25000
• B. 800, 800, 25000, 20000
• C. 1000, 800, 25000, 20000
• D. 1000, 800, 20000, 25000

Hint:

In money multiplier calculations, use the reserve ratio to determine how deposits and loans are distributed across successive rounds.

Answer 1

The Correct Option is C

- In Round I, total deposits are ₹5000. With a 20% reserve ratio, reserves amount to: \[ \text{Reserves} = 5000 \times 0.2 = 1000 \] The remaining amount of ₹4000 constitutes loans. - In Round II, deposits derived from loans are ₹4000. At a 20% reserve ratio, reserves are calculated as: \[ \text{Reserves} = 4000 \times 0.2 = 800 \] Loans are ₹4000 - ₹800 = ₹3200. - This iterative process results in a cumulative total deposit of ₹25000, total loans of ₹20000, and total reserves of ₹5000.