Advertisements
Advertisements
Question
Credit money is increased when CRR:
Options
Falls
Rises
Both falls and rises
None of the above
Advertisements
Solution
Falls
Explanation:
Credit money rises when the Cash Reserve Ratio (CRR) or General Reserve Ratio (GRR) falls. When the central bank lowers the reserve ratio, commercial banks have more funds to lend, boosting credit creation in the economy. When the reserve ratio grows, banks must keep more funds in reserve, limiting their ability to lend and cutting credit money.
RELATED QUESTIONS
Explain the credit creation role of commercial banks with the help of a numerical example.
Do you consider a commercial bank ‘creator of money’ in the economy’?
Explain the role of legal reserve ratio and Bank rate in correcting inflationary gap in an economy.
Deposits made by the people from their own resources are called ______.
If legal reserve ratio is 20%, the value of money multiplier would be ______.
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).
State the advantage of a credit card over currency notes.
Primary deposits differ from derivative deposits because ______.
The deposit multiplier formula is ______.
"Loans create deposits" means banks grant loans by ______.
