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False, Margin requirement is reduced by the Central Bank to increase money supply. Explanation:- Margin Requirements: Margin is the difference between the amount of the loan and the market value of the security offered by the borrower against the loan.…
False, Demand deposits are equal to sum total of primary deposits (i.e. cash deposits) and Secondary Deposits (i.e. deposits which arise due to loans).
False, The higher the value of the Legal Reserve Ratio, the lower the value of the money multiplier, and less money is created by the banking system. Explanation:- Credit or Money Multiplier is inversely related to LRR. Credit (Money) Multiplier…
False, Both repo rate and reverse repo rate are fixed by the Central Bank. Explanation:- Repo Rate and Reverse Repo Rate are the two tools of monetary policy. It is the policy adopted by the Central Bank of an economy…
True, A fall in margin requirements enhances the borrowing capacity of the public, which raises the money supply in the economy. Explanation:- Margin Requirements: Margin is the difference between the amount of the loan and the market value of the…
False, RBI acts as the banker to the central government as well as state governments. 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…
False, Through the function of money creation, commercial banks are able to offer loans (or create credit), which are in far excess of deposits received Explanation:- Loans offered are for more excess than the initial deposits. It depends on the…
True, Money Multiplier is inversely related to LRR as Money Multiplier = 1/LRR Additional Information:- 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…
True, Money Multiplier is inversely related to LRR as Money Multiplier = 1/LRR Additional Information:- 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…
False, They are fixed by Central Bank. Explanation:- Cash Reserve ratio and statutory liquidity ratio are the components of Legal Reserve Ratio. These are quantitative tools of monetary policy of central bank to control the money supply and credit creation.