A) calculate total deposit created by …
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Posted by Manav Sharma 5 years, 4 months ago
- 2 answers
Gaurav Seth 5 years, 4 months ago
A)
Given: Cash reserve ratio= 10%
Primary deposit= Rs. 1,250 crores
Total deposits are the over all money including the primary deposits created by the commercial banks as a process of credit creation through its primary deposit.
Total deposit= (1/ cash reserve ratio) x primary deposit
= (1/10%) x 1,250 crores
= (100/10) x 1,250 crores
= 10 x 1,250 crores
= 12,500 crores
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Gaurav Seth 5 years, 4 months ago
B)
Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must have keep as cash reserves with the central bank. The ratio is fixed by the central bank and is varied from time to time to control the supply of money in the economy depending upon the prevailing situation of inflation or deflation.
<div style="border:0px; margin:0px; padding:0px">Cash reserve ratio = (primary deposit / total deposit) x 100
= (2,500 / 20,000) x 100
= 12.5 %
Multiplier refers to the number of times the commercial banks multiplies the primary deposit in the credit creation process in order to create total deposits.
Multiplier = 1/ Cash reserve ratio
= 100 / 12.5
= 8 times
Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must have keep as cash reserves with the central bank. The ratio is fixed by the central bank and is varied from time to time to control the supply of money in the economy depending upon the prevailing situation of inflation or deflation.
<div style="border:0px; margin:0px; padding:0px">Cash reserve ratio = (primary deposit / total deposit) x 100
= (2,500 / 20,000) x 100
= 12.5 %
Multiplier refers to the number of times the commercial banks multiplies the primary deposit in the credit creation process in order to create total deposits.
Multiplier = 1/ Cash reserve ratio
= 100 / 12.5
= 8 times
</div> </div>0Thank You