If Rr is cash reserve ratio for commercial banks, then the value of credit multiplier will be :
The credit multiplier is \(1/R_r-1\). In the simple deposit-expansion model, an initial deposit \(D\) supports total deposits of \(D/R_r\). Credit created excludes the…
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If Rr is cash reserve ratio for commercial banks, then the value of credit multiplier will be :
Answer and explanation
Correct answer B
The credit multiplier is . In the simple deposit-expansion model, an initial deposit supports total deposits of . Credit created excludes the initial deposit, so it equals ; dividing by gives .
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Rajasthan SET (RSET)