Suppose money created by the banking system is ₹ 1,000 and the primary deposits is ₹ 250
Suppose money created by the banking system is ₹ 1,000 and the primary deposits is ₹ 250. The respective values of deposit multiplier and reserve ratio would be ____ and ____.
(a) 4, 25%
(b) 8, 12.5%
(c) 4, 12.5%
(d) 5, 20%
Anurag Pathak Changed status to publish January 5, 2024
Ans –
Explanation:-
Money created = ₹ 1,000
Primary Deposits = ₹ 250
Money Created = Primary Deposits × deposit multiplier
Deposit Multiplier = Money created/Primary Deposits
Deposit Multiplier = 1,000/250
Deposit Multiplier = 4 Times
Deposit Multiplier = 1/LRR
4 = 1/LRR
LRR = 1/4 × 100
LRR = 25%
Anurag Pathak Changed status to publish January 5, 2024
