Assertion (A): Credit creation comes to an end when total cash reserves become equal to the initial deposit

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Anurag Pathak28.56K January 5, 2024 0 Comments

Assertion (A): Credit creation comes to an end when total cash reserves become equal to the initial deposit.

Reason (R): Money multiplier is inversely related to legal reserve ratio.

Alternatives:

(a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).

(b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A).

(c) Assertion (A) is True but Reason (R) is False

(d) Assertion (A) is False but Reason (R) is True

score 0 · Answer 1 · 2024-01-05T14:24:49+00:00

Ans – (b)

Explanation:-

Assertion (A): is correct as credit creation comes to an end when total cash reserves become equal to the initial deposit.

Reason (R): is correct as money multiplier is inversely related to legal reserve ratio.

But Reason (R) does not explain Assertion (A)