ECONOMICS
MONEY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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ratio of money held by the public in currency to that of money held in bank deposits
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ratio of money held by public in bank deposits to that of money held by public in currency
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ratio of money held in demand drafts to that of money held in treasury bonds
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none of the above
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Detailed explanation-1: -Currency Deposit Ratio is the ratio of money held by public in currency to that they hold in bank deposits. The currency deposit ratio shows the amount of currency that people hold as a proportion of aggregate deposits. It reflects people’s preference for liquidity.
Detailed explanation-2: -The Currency Deposit Ratio: The currency deposit ratio (cdr) is the ratio of money held by the public in currency to that they hold in bank deposits. cdr = CU/DD. If a person gets Re 1 she will put Rs 1/(1 + cdr) in her bank account and keep Rs cdr/(1 + cdr) in cash. It reflects people’s preference for liquidity.
Detailed explanation-3: -Definition: Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.
Detailed explanation-4: -Meaning of cash deposit ratio in English the amount of money a bank should have available as a percentage of the total amount of money its customers have paid into the bank. This amount is calculated so that customers can be sure that they will be able to take their money out of the bank if they want to.
Detailed explanation-5: -The currency issued by the central bank can be held by the public or by the commercial banks and is called the ‘high-powered money’ or ‘reserve money’ or ‘monetary base’. Demand deposits are created by the commercial banks and are called Bank money.