We can begin the fictional bank with deposits or liabilities equal to ₹1,000. This could be due to Ms. Sharon depositing ₹1,000 in the bank. Let this bank deposit be the same amount with the Reserve Bank of India as reserves. The following table represents its balance sheet.
|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 mentioned concept explains in detail about the balance sheet of a fictional bank. To know more about such interesting concepts, stay tuned to BYJU’S.