BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fresh deposit with bank become zero
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LRR become zero
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money multiplier becomes zero
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total reserves equal initial deposits
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Detailed explanation-1: -The deposit creation comes to an end when total cash reserves with the bank are equal to the initial deposit of Rs. 100.
Detailed explanation-2: -The process of credit creation by commercial banks comes to an end when total money reserves become equals to initial deposit.
Detailed explanation-3: -The process of deposit creation entails how commercial bank systems accept new deposits to increase the economy’s money supply. The deposits come from the general public, and some of them remain with the banks to fund daily activities, while some portion is allocated to advance loans to the public.
Detailed explanation-4: -Every time a dollar is deposited into a bank account, a bank’s total reserves increases. The bank will keep some of it on hand as required reserves, but it will loan the excess reserves out. When that loan is made, it increases the money supply. This is how banks “create” money and increase the money supply.