Archives Answers

Ans – (c) Explanation:- Assertion (A) is correct as the money from the demand deposits can be withdrawn on demand and a convenient mode of payment for the execution of even the high-value transactions. Reason (R) is false as demand…

Ans – (a) Explanation:- Assertion (A) is correct as the credit creation by commercial banks raises the money supply in the economy as in the money creation process commercial banks distribute the loans which are in deposited in a new…

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…

Ans – (c) Explanation:- Assertion A is true as commercial banks contribute to quantum of money supply in the economy through credit creation. Reason (R) is false as commercial banks does not have the note issuing authority. This is the…

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…

Ans – (b) Explanation:- Assertion (A) is correct as the central bank acts as a banker to the government. As a banker, it carries out all banking business of the government. It maintains a current account to keep its cash…

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…

Ans – (a) Explanation:- Banker to the Government:- The Reserve Bank of India acts as a banker, agent, and financial advisor to the Central Government and all the State Governments. As a banker, it carries out all banking business of…

Ans – (a) Explanation:- Central Bank enjoys the sole monopoly of issuing currency. That’s why the central bank is also known as the bank of issue. Currency Authority (or Bank of Issue):- The Central Bank has the sole authority for…

Ans – (a) Explanation:- Lender of the Last Resort:- When commercial banks fail to meet their financial requirements from other sources, i.e., in case of a financial emergency, they approach the central bank to give loans and advances as lender…