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Ans – (c) Explanation:- Statement 1 is true. The value of the money multiplier is determined by the reserve ratio prevailing in the monetary system. Statement 2 is false as it is inversely related to the LRR. Money Multiplier =…
Ans – (a) Explanation:- Statement 1 is correct as the statutory liquidity ratio is one of the tools of the monetary policy to control the credit creation. the monetary policy is determined by the Reserve Bank of India. Statement 2…
Ans – (c) Explanation:- Statement 1 is true, as commercial banks are able to lend money which is a number of times more than their cash reserves. for example:- Initial Deposits (Cash Reserves) = ₹ 1,000 LRR = 10% Credit…
Ans – (b) Statement 1 is false as all financial institutions are not banking institutions. A financial institution to be a bank must accept deposits and advance the loans. As far as accepting deposits, a financial institution must accept the…
Ans – (d) Explanation:- Statement 1 is false as the central bank is fully owned by the government of India. The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank…
Ans – (a) Explanation:- Statement 1 is correct as a decrease in repo rate and reverse repo rate enhances the credit-creating power of commercial bank. Repo Rate: Repo rate is the rate at which the central bank of a country…
Ans – (a) Explanation:- Statement 1 is correct as Money creation by commercial banks raises the National Income. In the process of money creation, the commercial bank creates money by creating new demand deposits by providing loans to the public.…
Ans – (d) Explanation:- Statement 1 is false, Money Multiplier is inversely related to legal reserve ratio. Statement 2 is correct commercial banks create credit based upon the initial deposit and legal reserve ratio. Money multiplier = 1/LRR Credit Creation…
Ans – (c) Explanation:- Statement 1 is true as the sum total of primary and secondary deposits is equal to the total demand deposits of the commercial banks. Statement 2 is false as secondary deposits are more as compared to…
Ans – (d) Explanation:- Assertion (A) is false as the Reserve ratio and credit creation power of the commercial bank is inversely related. Reason (R) is correct as credit creation is the product of the reciprocal of the Reserve Ratio…