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

The above mentioned is the concept that is explained in detail about the Balance Sheet of a Fictional Bank. To know more, stay tuned to BYJUS.

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