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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A bank has cash reserves of ₹2,000 and the CRR is 10%. What is the maximum amount of credit that can be created?
A bank has total deposits of ₹1,00,000 and maintains a CRR of 5%. How much can it lend?
A bank receives a deposit of ₹10,000. If the CRR is 10%, what is the first loan the bank can make?
Describe any two limitations of credit creation by commercial banks.
Describe the role of public’s preference for cash in limiting credit creation.
Explain how the central bank can control the credit creation capacity of commercial banks.
Explain the difference between primary deposits and derivative deposits.
Explain the effect of a decrease in the cash reserve ratio on the process of credit creation.
Explain the impact of leakages in the banking system on credit creation.
Explain the process of multiple credit creation with the help of an example.
Explain the role of the central bank in controlling the process of credit creation during inflation.
Explain why a higher cash reserve ratio reduces the credit creation capacity of banks.
If a bank receives a primary deposit of ₹5,000 and the CRR is 20%, what is the maximum total credit that can be created in the banking system?
If the cash reserve ratio is 10%, what is the credit multiplier?
If the CRR is 8%, what is the credit multiplier?
If the CRR is increased from 5% to 10%, what happens to the credit multiplier?
What is meant by 'credit creation' by commercial banks?
