Question

In which of the following case the credit creation will be unlimited (Choose correct alternative) (a) CRR is 70% (b) primary deposits are zero (c) secondary deposits are zero (d) none of these​

Answer 1

Explanation:

I think A is correct answer

Answer 2

Answer to the given question

Explanation:

• Credit-creation is expansion of the deposits where banks expand their demand-deposits as a multiple of their cash reserves.

• The reserves over & above cash reserves are the excess-reserves. These reserves are used for the credit creation & loans.

• Two ways of analyzing the credit-creation process:  Credit-creation by single bank  and Credit-creation by banking system as a whole.

• Option b is the answer of the question