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Money Creation by Banks · Question 33 of 58

Question 33

MediumOriginal question

An initial deposit of ₹1,000 crore is made and the reserve ratio is 20%. Total deposits created in the banking system are

Options for question 33

Show the answer and explanation
CorrectNot quiteAnswer C

Correct answer: C

Explanation

  1. Multiplier = 1 ÷ 0.2 = 5.

  2. Total deposits = 1,000 × 5 = ₹5,000 crore.

Worth noting

₹4,000 crore is the new credit created (total deposits minus the first deposit), not total deposits.

Concept
Total deposits
Typical time
70 s
Your time
—
The rule this testsThe money multiplier
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Ten questions from Money Creation by Banks, at your own pace.

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