Can you also clear my confusion …

Its my pleasure

Thank u very much

We know that only commercial bank has the of issuing currency but commercial banks create money credit creation out of the deposit they have.The amount of money that commercial banks create can be depends upon on two factors :1. Initial level of deposit 2. LRR i.e. Legal Reserve Ratio . The fraction by which commercial banks can multiply currency or money depends upon money multiplier i.e. K =1/LRR and the amt created will be equal to. .... Money created = Intial deposit × 1/LRR....... We can take an example to understand money credit creation . Bank has a Intial deposit of 10000 and LRR is 20% so banks has to keep 2000 and lend rest of the amt and this 8000 will come to banks by the way of transactions which results in increase in deposit by 8000 again will lend this 80% that is 6400 and this process will continue and in the end commercial banks will be able to create credit equal to. .... Money created = 10000× 1/0.20 =50000 That is 5 times more than the initial deposit which is 10000.........

Ok

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In process of money creation

Yes ,why not