Question:
Suppose you deposit Rs. 10000 in your deposit account in a commercial bank. If the bank wishes to hold 20% of all deposits on reserve, how much new deposits can it create as a direct result of your deposit?
(1) Rs. 8000
(2) Rs. 10000
(3) Rs. 40000
(4) Rs. 50 000
(5) Rs. 52000
Correct Answer:
(1)
Answer Explanation:
Rs.10000 * 0.2 = Rs. 2000 & Rs. 10000 – Rs,2000 = Rs.8000
Topic: Money and Banking Year: 2017
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