Given below are two statements: one is labelled as Assertion A and the other is labelled as Reason R. Assertion A: Commercial banks possess the unique ability to expand the broader money supply in the economy far beyond the initial deposits they receive. Reason R: Commercial banks create new money by lending out portions of the deposited funds, which results in a multiplier effect that stimulates economic activities. In the light of the above statements, choose the most appropriate answer from the options given below:

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Economics · Money and Banking

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Correct answer

Both A and R are correct and R is the correct explanation of A

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Answer 1

Both A and R are correct but R is NOT the correct explanation of A

Answer 2

Both A and R are correct and R is the correct explanation of A

Answer 3

A is correct but R is not correct

Answer 4

A is not correct but R is correct

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