Balance Sheet of a Fictional Bank

We can begin the fictional bank with the deposits or liabilities equal to 1,000. This could be because Ms Sharon has deposited 1,000 in the bank. Let this bank deposit the same amount with Reserve Bank of India as reserves. The below mentioned table represents its balance sheet :

Dr.

Cr.

Assets

Liabilities

Reserves

1,000

Deposits

1,000

Net Worth

0

Total

1,000

Total

1,000

If we presume that there is no currency in circulation, then the total money supply in the economy will be equal to 1,000.

M1 = Currency + Deposits = 0 +1,000 =1,000

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