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Questions
What is meant by credit creation?
What is credit (or money) creation?
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Solution
Credit creation refers to the creation of demand deposits by banks in process of making loans. It signifies that power of commercial banks by which they create secondary deposits on the basis of primary deposits.
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RELATED QUESTIONS
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| Column A | Column B | ||
| (i) | A deposit created by a customer | A. | Term deposit |
| (ii) | A deposit created by bank when loan is granted | B. | Demand deposits |
| (iii) | Deposits payable by bank on demand | C. | Initial deposit |
| (iv) | Deposits the amount of which can be withdrawn only after a fixed period of time | D. | Secondary deposit |
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