Question

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LRR and money creation has :
a)positive relation
b)negative relation
c)no relation
d)both (a) & (b)

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Answer 1

Answer:

It has a positive relation. Please mark as brainliest

Answer 2

Answer:

b)negative relation

LRR and money creation has negative relation.

Explanation:

LRR and money multiplier are related by the formula money multiplier = 1/LRR. The Legal Reserve Ratio and the money multiplier are inversely related (LRR). LRR stands for the number of deposits that banks must always keep on hand as reserves in order to cover potential unforeseen circumstances and to uphold the public's confidence.

The two types of reserves that banks must keep are as follows:

• The ratio of cash reserves that banks must keep on hand at the central bank is called the CRR. Statutory Liquidity Ratio (SLR), which displays the quantity of reserves that banks must keep on hand in the form of liquid assets. Because it functions as a total money supply formula that is used to calculate money supply.
• The straightforward money multiplier formula serves as an excellent tool in the monetary economy for the Central Bank to control the creation of money.
• Formula for Increasing Money Money factor equals one Reserve Ratio 1 /Reserve Ratio Reserve Ratio is text 1 of the sentence. LRR stands for the legal reserve requirements. Money multiplier = 1 LRR Equation of a Money Multiplier Money Multiplier = In the Monetary Base and the Total Money Supply