Based on the information in the table, the money supply as measured by M2 is equal to: a b с Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. d $4,000 billion. $14,000 billion. $16,000 billion. Table 1 MONEY IN THE ECONOMY (billions of dollars) Currency held by the public Demand Deposits $18,000 billion. Other Liquid Deposits Small Denomination Time Deposits Retail Money Market Funds $1,000 $3,000 $12,000 $500 $1,500

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Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.