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Money Creation by Banks · Question 45 of 58

Question 45

HardOriginal question

Fresh deposits of ₹1,000 crore come into banks. If the reserve ratio is cut from 20% to 10%, the total deposits that can be built on them rise by

Options for question 45

Show the answer and explanation
CorrectNot quiteAnswer C

Correct answer: C

Explanation

  1. At 20%: 1,000 × 5 = 5,000. At 10%: 1,000 × 10 = 10,000.

  2. Rise = 10,000 − 5,000 = ₹5,000 crore.

Worth noting

₹10,000 crore is the new total, not the rise.

Concept
A cut in the reserve ratio
Typical time
100 s
Your time
—
The rule this testsThe money multiplier
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