Advertisements
Advertisements
Question
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Increase in cash reserve ratio adversely affects the capacity of commercial banks to create credit.
Reason (R): An increase in cash reserve ratio reduces the excess reserves of commercial banks and hence limits their credit creating power.
Options
Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
Assertion (A) is true but Reason (R) is false.
Assertion (A) is false but Reason (R) is true.
Advertisements
Solution
Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
APPEARS IN
RELATED QUESTIONS
The rate of which commercial banks borrow from the Central Bank is the:
Explain how credit rationing helps to control credit in an economy.
Which of the following is not a quantitative method of credit control?
What is meant by open market operations?
Define the term Statutory Liquidity Ratio.
Differentiate between quantitative and qualitative methods of credit control.
Define the following term:
Cash Reserve Ratio.
Define the following term:
Margin Requirements.
Identify the following Credit Control measures undertaken by the Central Bank during inflation.
The Central Bank increases the rate at which it lends to the Commercial Bank.
Describe two quantitative credit control measures of the Central Bank.
