Question

If indeed the deposits made by banks are ₹ 10 ,000 crore and legitimate reserve requirements are 40 percent, then the amount of initial deposits will be

A ₹ 4000 crore Correct Answer Incorrect Answer
B ₹ 14000 crore Correct Answer Incorrect Answer
C ₹ 3000 crore Correct Answer Incorrect Answer
D ₹ 2000 crore Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

The money multiplier equals 2 .5 . So dividing 10 ,000 by 2 .5 , we arrive at an initial deposit figure of 4000 crores.

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