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प्रश्न
How money multiplier is related to Legal Reserve Ratio?
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उत्तर
- The relationship between the Money Multiplier and the Legal Reserve Ratio (LRR) can be expressed through the following formula:
Money Multiplier = `1/"LRR"` - The money multiplier is inversely related to the LRR. A greater LRR requires banks to maintain higher percentages of deposits as reserves, reducing their ability to lend and thus reducing the money multiplier. Conversely, a lower LRR allows banks to lend out more deposits, resulting in a bigger money multiplier.
For example, if the LRR is 10% (0.1), the money multiplier would be:
Money Multiplier = `1/0.1 = 10`
संबंधित प्रश्न
______ is the main source of money supply in an economy.
Credit creation by the commercial bank is determined by ______.
Explain the role of legal reserve ratio and Bank rate in correcting inflationary gap in an economy.
''The process of credit creation by commercial banks comes to an end when the total of required reserves become equal to the initial deposits."
With the help of a numerical example, prove that the given statement is true.
Identify which of the following Statement is true?
The ratio of total deposits that a commercial bank has to keep with Reserve Bank of India is called ______.
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Credit Creation comes to an end when total cash reserves become equal to the initial deposits.
Reason (R): The value of money multiplier is determined by Legal Reserve Ratio (LRR).
Explain briefly the process of credit creation by commercial banks.
Primary deposits differ from derivative deposits because ______.
If CRR is 20% and initial deposit is ₹1000, total deposits created are ______.
