Question

What will be credit creation when there is high legal reserve ratio?

Answer 1

Answer:

6 Major Limitations on Credit Creation by Banks

Limitation # 1. Lack of Securities: Banks cannot expand deposits by granting loans and advances unless proper securities are available. ...

Limitation # 2. The Business Environment: ...

Limitation # 3. Lack of Cash: ...

Limitation # 4. The Habits of the People: ...

Limitation # 5. Leakages: ...

Limitation # 6. The Central Bank's Policy:

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Answer 2

Answer:

when the legal reserve ratio is high the credit creation will be low.

Explanation:

credit creation (money multiplier) is inversely propotionately to legal reserve ratio.

money multiplier = 1÷legal reserve ratio