BANKING AFFAIRS

Detailed explanation-1: -The initial deposits of ₹10, 000 have been made into the bank, and the banks are required to maintain 20% of the deposits with them as the LRR is 20%, therefore the bank has to maintain 20% of ₹10, 000 i.e. ₹2, 000 with itself and can lend the rest of the money i.e. ₹8, 000 as loans to the public.

Detailed explanation-2: -Money Multiplier = 10.2=5 1 0.2 = 5 where reserve ratio is 20 percent or 0.2. 2.

Detailed explanation-3: -Money Multiplier = 1/LRR or 1/r It is the minimum ratio of deposits that is legally required to be kept by the commercial banks of the economy with themselves and with the central bank of India, also known as the RBI.

Detailed explanation-4: -18. If total deposits created by commercial banks are Rs. 12, 000, LRR is 25%, calculate initial deposit. Ans: Money Multiplier = 1/LRR = 1/025 = 4 Initial Deposit = Total Deposit / Money Multiplier = 12000 / 4 Page 6 Class XII Macro Economics www.vedantu.com 6 = Rs.