Balance Sheet of a Fictional Bank

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.                                  



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 mentioned concept explains in detail about the balance sheet of a fictional bank. To know more about such interesting concepts, stay tuned to BYJUS.

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