Assertion (A): Money Multiplier is the process by which the commercial banks create credit
Assertion (A): Money Multiplier is the process by which the commercial banks create credit.
Reason (R): Money Creation by Commercial Banks raises the National Income.
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
Anurag Pathak Changed status to publish January 5, 2024
Ans – (b)
Explanation:-
Assertion (A) is correct as the Money Multiplier is the process by which commercial banks create credit.
Money Multiplier is the number by which total deposits can increase due to a given change in deposits. It is inversely related to the legal reserve ratio.
In other words, the Money Multiplier is the process by which commercial banks create credit, based on the reserve ratio and initial deposits.
Reason (R) is correct as money creation by commercial banks raises the national income.
Money created by banks can also be used in the settlement of liabilities and purchases.
But Reason (R) is not the correct explanation of Assertion (A).
Anurag Pathak Changed status to publish January 5, 2024
