Credit Creation by Commercial Banks
Economics ⇒ Money and Banking
Credit Creation by Commercial Banks starts at 11 and continues till grade 12.
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See sample questions for grade 11
A bank has total deposits of ₹1,00,000 and a cash reserve ratio of 10%. How much can it lend?
A bank receives a deposit of ₹10,000. If the cash reserve ratio is 25%, what is the maximum total credit that can be created in the system?
Describe the effect of a fall in the cash reserve ratio on the process of credit creation.
Describe the impact of an increase in the cash reserve ratio on the ability of commercial banks to create credit.
Describe the process by which a single deposit can lead to multiple expansions of credit in the banking system.
Explain how leakages in the banking system affect the process of credit creation.
Explain how the central bank can control credit creation by commercial banks.
Explain the difference between primary and derivative deposits.
Explain the role of the cash reserve ratio (CRR) in the process of credit creation.
Explain the term 'fractional reserve banking' in the context of credit creation.
Explain why credit creation by commercial banks is called 'multiple expansion of credit'.
If the cash reserve ratio is 10%, what is the credit multiplier?
If the cash reserve ratio is 12.5%, what is the credit multiplier?
If the cash reserve ratio is 5%, what is the credit multiplier?
If the cash reserve ratio is increased from 10% to 20%, what happens to the credit multiplier?
If the initial deposit is ₹5,000 and the cash reserve ratio is 20%, what is the maximum amount of credit that can be created?
What is meant by 'credit creation' by commercial banks?
What is the formula for the credit multiplier?
