CBSE 2021 Class 12 Economics Term 1 Paper

Question : 36 of 60

Marks: +1, -0

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 ______.
(Choose the correct alternative)

Solution:

(a)

4,25 \%

Explanation:
Money created

=1000

Primary Deposit

=250

Money creation = Initial deposit

\times

Money

\/

deposit multiplier

1000\;=250 × \;\text " Money "\; \/

Deposit Multiplier

\;{1000}/{250}\;=\;\text " Deposit multiplier "\;

4 = Deposit multiplier

\;\text " Money "\; \/ \;\text " Deposit multiplier "\;=\;{1}/{\;\text " LRR "\;}

4\;=\;{1}/{ {\LRR}}

{\LRR}\;=\;{1}/{4}

4 × {\LRR}\;=1

{\LRR}\;=\;{1}/{4}=0.25 × 100=25 \%

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