Reserve-deposit ratio

The reserve-deposit ratio (rr) This refers to the fraction of
deposits banks hold in reserves. The rr depends not only on
the laws regulating the banks but also on the business
policies of banks. In addition to the required reserves, banks
hold some excess reserves to meet unexpected withdrawals.
Therefore rr is determined partly by government regulations
and partly by the banks decision on how much of their
deposits they want to lend.

The currency-deposit ratio(cr) refers to the amount of
currency (C) people hold as a fraction of their deposits (D).
This ratio reflects the public’s preference about the form
of money they wish to hold. ( This ratio is determined by
the public and depends on the amount of money the public
wants to hold as currency versus the amount it wants to
hold as deposits. The public can raise the currency-deposit
ratio to any level it wants by withdrawing currency from
banks (which increases currency held and reduces deposits).
Likewise by depositing currency in banks, the public can
lower the currency-deposit ratio.