If the Legal Reserve Ratio is 20% and initial deposit is ₹ 2,000, then value of money multiplier and total money creation will be ____ and ____
If the Legal Reserve Ratio is 20% and initial deposit is ₹ 2,000, then value of money multiplier and total money creation will be ____ and ____.
(a) 5, ₹ 10,000
(b) 4, ₹ 8,000
(c) 6, ₹ 2,000
(d) 4, ₹ 10,000
Anurag Pathak Changed status to publish January 5, 2024
Ans – (a)
Solution:-
Money Multiplier = 1/LRR
Money Multiplier = 1/20%
Money Multiplier = 100/20 = 5 times
Total Credit Creation = Initial Deposits Money Multiplier
Total Credit Creation = 2,000 5
Total Credit Creation = ₹ 10,000
Anurag Pathak Changed status to publish January 5, 2024
