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Money Creation by Banks · Question 14 of 58

Question 14

EasyOriginal question

Read the two statements and choose the correct option.

I. Reserves held with the RBI under the CRR earn no interest for banks.

II. Banks may lend their required reserves when demand for loans is high.

Options for question 14

Show the answer and explanation
CorrectNot quiteAnswer A

Correct answer: A

Explanation

  1. CRR balances are kept idle with the RBI. I is true.

  2. Required reserves must be held; only excess reserves can be lent. II is false.

Concept
Required reserves
Typical time
40 s
Your time
—
The rule this testsReserves and the reserve ratio
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