Practice Money Creation By Banking System (3.3) - Money and Banking

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6 sample questions

Question 1.
What is the money multiplier when the CRR is 25%?
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Use the formula 1/CRR.
Question 2.
How much of a Rs 200 deposit can a bank lend out if CRR is 20%?
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Calculate 20% of 200 for reserves.
3Question 3.
What does the money multiplier indicate about bank deposits?
- The total deposits
- The initial reserves
- The total money that can be created
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Remember how deposits lead to loans in the banking system.
4Question 4.
True or False: A higher CRR allows banks to lend more money.
- True
- False
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Think about how reserves affect lending.
Question 5.
If a country's banking system has a total reserve of Rs 500, under a CRR of 10%, calculate how much total money can be created.
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Remember to use the money multiplier formula.
Question 6.
Discuss the effects of changing the CRR from 5% to 15%. How would this affect the money supply in the economy?
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Consider how reserves relate to total money available for lending.

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