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Anybody please explain credit creation..!??

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Anybody please explain credit creation..!??

    • Posted by Abc Xyz 7 years, 11 months ago

    CBSE > Class 12 > Economics
    • 5 answers

    Anjali Yadav 7 years, 11 months ago

    Credit creation refers to the process by which commercial bank are able to increase supply of money more time of this intial deposit

    0Thank You

    Mimansha Rawat 7 years, 11 months ago

    The process through which banks are able to create credit which is in far excess of initial deposits

    0Thank You

    Yas S 7 years, 11 months ago

    Assume initial deposit is 1000,and cash reserves be 10%.Banks are required to keep 10%of deposit i.e100and then bank will lend the amount of 900. Bank never transfer the amount in CASH rather they open an account of the borrower and then deposit. Lat say borrowers withraw entire amount of 900 for making payment through check and increases the demand deposit of 900. Now the new deposit is 900,bank will again lend the 810 by holding 10%of cash reserves i.e 90 such process will keep on going until total cash reserves r equal to initial deposit i.e 1000.

    4Thank You

    Ritu Rajak 7 years, 11 months ago

    Credit multiplier =1\required reserve ratio

    3Thank You

    Ritu Rajak 7 years, 11 months ago

    Credit creation means that on the basis of primary deposit commercial bank make loans and expand the money supply .it result in multiple expansion of bank demand deposits

    2Thank You

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