Assertion (A): With increase in legal reserve ratio, credit creation capacity of commercial banks reduces.

Question

0

Anurag Pathak24.20K January 5, 2024 0 Comments

Reason (R): An increase in reserve ratios reduces the available funds with banks which it can give for loans.

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 · 2024-01-05T15:32:58+00:00

Ans – (a)

Explanation:-

With the increase in the legal reserve ratio, the credit creation capacity of commercial banks is reduced.

An increase in reserve ratio reduces the available funds with banks which it can give for loans.

The Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A)