CBSE BOARD XII, asked by muskan1023, 6 months ago

Credit creation is inversely related to the reserve deposit ratio‟.

Justify the given statement, using a hypothetical example.​

Answers

Answered by lalitnit
23

Answer:

Total Credit creation = Initial deposits x 1/LPR. Money Multiplier: It means the multiple by which total deposit increases due to initial (primary) deposit. Money multiplier (or credit multiplier) is the inverse of Legal Reserve Ratio (LRR). If LRR is 10%, i.e., 10/100or 0.1, then money multiplier = 1/0.1 = 10.

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