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Money Multiplier = 1/LRR LRR = Legal Reserve Ratio Explanation:- Money Multiplier is the process by which commercial banks create credit, based upon the reserve ratio and initial deposits. It is calculated as:- Money Multiplier = 1/LLR For example: LRR…
Central bank has sole monopoly in issue of currency. Explanation:- One of the functions of the Central Bank is: Current Authority (or Bank of Issue):- The Central Bank has the sole authority for the issue of currency in the country.…
Bank Rate is also known as Discount Rate. Explanation:- The Bank Rate is the rate at which the central bank provides long-term loans to commercial banks to meet their financial requirements. The Bank Rate is also known as the Discount…
Reverse Repo Rate is exact opposite of Repo Rate. Explanation:- Repo rate is the rate of interest at which the Central Bank provides short-term loans to the Commercial Bank The Reverse Repo Rate is the rate of interest at which…
Open Market Operations refers to the buying and selling of government securities by the Central Bank from/to the public and commercial banks. Explanation:- Open Market Operations is one of the quantitative Credit Control Instruments of RBI. By practicing it, the…
The Repo Rate or Repurchase Rate is the rate at which RBI lends money to commercial banks to meet their short-term needs. Explanation:- The Rep Rate is also the Repurchase Rate as Repo stands for ‘Repurchasing Option’ or ‘Repurchase Agreement’.…
Quantitative instruments of monetary policy affect the volume of money supply in the economy. Explanation:- Quantitative instrument of monetary policy comprises the following measures: 1. Repo Rate Policy 2. Bank Rate Policy 3. Reverse Repo Rate Policy 4. Open Market…
All trading companies, manufacturing companies, and other business establishments are non-financing companies. The commission received is considered an operating activity of trading companies. Thus commission received is also known as the Trading Commission Received.
Money Multiplier is also known as Credit Multiplier or Deposit Multiplier. Explanation:- It is also known as credit multiplier and deposit multiplier as commercial banks create more deposits by giving credit to others from the initial deposits. That new deposit…
The above statement is justified in a two-sector economy. In a two-sector economy, there are only two sectors. Firm Households the following statement is justified under the following assumption. Households spend all their income Firms retain nothing as undistributed profit…