Question

Q.13 If total deposits created by commercial banks is Rs 12000/- and legal

reserve requirement is 25% ,then calculate the amount of initial deposit​

Answer 1

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Answer 2

Given:

Total deposit = Rs12,000

Legal reserve requirement = 25% or 0.25%

To Find:

Initial deposit.

Solution:

Firstly, we have to calculate the money multiplier by using the formula $(\frac{1}{LRR})$

After putting the given value, we get

$\frac{1}{0.25}=4$

It is given in that the total deposit created is Rs12,000.

here, we have to calculate the initial deposit by using the formula $\frac{Total deposits}{Money multiplier}$

then we get,

Initial deposit = $\frac{12000}{4}$ = $Rs. 3000$

Hence, the amount of the initial deposit is Rs.3000