Ayushi posted an Question
August 13, 2020 • 18:19 pm 30 points
  • UGC NET
  • Economics

46. assume that the reserve requirement is 20 percent. if a bank initially has no excess reserves and rs 10,000 cash is deposited in the bank, the maximum amoun

46. Assume that the reserve requirement is 20 percent. If a bank initially has no excess reserves and Rs 10,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loans is (1) Rs 2,000 2YRs 8,000 (3) Rs 10,000 (4) Rs 20,000 Hbll? (1) 2,000 To (2) 8,000 Fo (3) 10,000 Fo (4) 20,000 Fo

1 Answer(s) Answer Now
  • 0 Likes
  • 1 Comments
  • 0 Shares
  • comment-profile-img>
    Nidhi taparia best-answer

    I am afraid, none of the options is right here. When we know the initial deposits and reserve ratio, we find out the maximum loans that can be raised is given by the money multiplier. Money multiplier = 1/r where r = reserve requirement so in this case, r = 0.20 Money multiplier = 1/0.2 = 5 Maximum loan amount = 5 × 10,000 = 50,000

whatsapp-btn

Do You Want Better RANK in Your Exam?

Start Your Preparations with Eduncle’s FREE Study Material

  • Updated Syllabus, Paper Pattern & Full Exam Details
  • Sample Theory of Most Important Topic
  • Model Test Paper with Detailed Solutions
  • Last 5 Years Question Papers & Answers