Question

Suppose in an economy, the initial deposit of ₹ 400 crores lead to the creation of total deposits worth ₹ 4000 crore. Then the value of reserve requirements would be ______.

पर्याय

• 0.01

• 1

• 0.1

• 0.21

Answer 1

Suppose in an economy, the initial deposit of ₹ 400 crores lead to the creation of total deposits worth ₹ 4000 crore. Then the value of reserve requirements would be 0.1.

Explanation:

Money Multiplier = `1/"Reserve Ratio"`

Also, Money Multiplier = `"Total Deposits"/"Initial Deposit"`

Given:

Initial deposit = ₹400 crores
Total deposits = ₹4000 crores

Step 1: Calculate the Money Multiplier

Money Multiplier = `4000/400 = 10`

Step 2: Calculate the Reserve Requirement (Reserve Ratio)

Reserve Ratio = `1/"Money Multiplier" = 1/10 = 0.1`