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CBSE 2021 Class 12 Economics Term 1 Paper

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Question : 36 of 60
Marks: +1, -0
Suppose money created by the banking system is 1,000 and the primary deposits is ₹ 250\text{₹}\,250. The respective values of deposit multiplier and reserve ratio would be ______ and ______.
(Choose the correct alternative)
Solution:  
(a) 4,25%4,25\%
Explanation:
Money created =1000=1000
Primary Deposit =250=250
Money creation = Initial deposit ×\times Money // deposit multiplier
1000  =250×   Money   /1000\;=250 \times \;\text{ Money }\; / Deposit Multiplier
  1000250  =   Deposit multiplier   \;\frac{1000}{250}\;=\;\text{ Deposit multiplier }\;
4 = Deposit multiplier
   Money   /   Deposit multiplier   =  1   LRR   \;\text{ Money }\; / \;\text{ Deposit multiplier }\;=\;\frac{1}{\;\text{ LRR }\;}
4  =  1LRR4\;=\;\frac{1}{LRR}
LRR  =  14LRR\;=\;\frac{1}{4}
4×LRR  =14 \times LRR\;=1
LRR  =  14=0.25×100=25%LRR\;=\;\frac{1}{4}=0.25 \times 100=25\%
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