Physics · Banking and Credit Creation
Consider the following statements regarding credit creation by commercial banks: 1. Credit creation is mathematically limited by the Cash Reserve Ratio (CRR). 2. It is more effective when the public prefers holding deposits over physical currency. 3. The credit multiplier is the reciprocal of the Legal Reserve Ratio (LRR) under all non-bank transaction conditions. Which of the statements given above are correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 11, 2 and 3
- 21 and 3 only
- 32 and 3 only
- 41 and 2 only✓
Correct answer
1 and 2 only
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