Question

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

• A. 1000, 800, 20000, 25000
• B. 5000, 3200, 25000, 20000
• C. 1000, 3200, 25000, 20000
• D. 1000, 800, 20000, 25000

Hint:

In monetary expansion calculations, remember that total Deposits grow as the loan process continues. The reserve ratio determines the proportion of Deposits that banks must hold, while Loans are the remaining percentage available for lending.

Answer 1

The Correct Option is C

Step 1: Calculating missing figures.
- The Reserve Ratio is 20\% of Deposits.
Thus, \( (i) = 20\% \times 5000 = 1000 \).
- Loans are 80\% of Deposits. For Round II, \( (ii) = 80\% \times 4000 = 3200 \).
- The total Deposits sum up over all rounds.
Since the loan cycle continues, the total Deposits at equilibrium reach:
\( (iii) = 5000 + 4000 + … = 25000 \).
- The total Loans are also accumulated over all rounds: \( (iv) = 4000 + 3200 + … = 20000 \).
Step 2: Conclusion. The missing values are \( (i) = 1000 \), \( (ii) = 3200 \), \( (iii) = 25000 \), \( (iv) = 20000 \), which match option \( \mathbf{(C)} \).