Assertion A The money creation multiplier is equal to the reciprocal of the minimum reserve ratio Re...........

Economic Affairs Money Supply and Monetary Policy

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Assertion(A): The money creation multiplier is equal to the reciprocal of the minimum reserve ratio.

Reason(R): The banking system as a whole can grant new credit up to an amount of excess reserves.

Code:

Both A and R tare individually true and R is the correct explanation of A

Both A and R are individually true, but R is not the correct explanation of A

A is true, but R is false

A is false, but R is true

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Explanation:

Money multiplier (also known as monetary multiplier) represents the maximum extent to which the money supply is affected by any change in the amount of deposits. It equals ratio of increase or decrease in money supply to the corresponding increase and decrease in deposits.