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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:
Assertion (A): Size of multiplier is given by the inverse of LRR
Reason(R): There is direct relationship between LRR and value of money multiplier
- a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).
- b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).
- c)Assertion (A) is true but reason (R) is false.
- d)Assertion (A) is false but reason (R) is true.
Correct answer is option 'C'. Can you explain this answer?
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Directions: In the following questions, a statement of assertion (A) ...
The deposit multiplier is sometimes expressed as the deposit multiplier ratio, which is the inverse of the required reserve ratio. For example, if the required reserve ratio is 20%, the deposit multiplier ratio is 80%.
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Directions: In the following questions, a statement of assertion (A) ...
Assertion (A): Size of multiplier is given by the inverse of LRR
Reason (R): There is a direct relationship between LRR and the value of money multiplier
Explanation:
The size of the multiplier refers to the extent to which an initial change in spending or investment leads to a larger final change in aggregate demand. The money multiplier is a measure of the potential increase in the money supply resulting from an increase in bank reserves.
LRR, or the legal reserve ratio, is the proportion of deposits that banks are required to hold as reserves. When banks receive deposits, they are required to keep a certain percentage of those deposits as reserves and can lend out the rest. The inverse of LRR represents the multiple by which bank deposits can expand through the lending process.
Now, let's evaluate the given assertion and reason:
Assertion (A): Size of multiplier is given by the inverse of LRR
This assertion is true. The size of the multiplier is determined by the inverse of the legal reserve ratio. The higher the legal reserve ratio, the smaller the multiplier, and vice versa. This is because a higher reserve ratio means that banks can lend out a smaller portion of their deposits, resulting in a smaller increase in the money supply.
Reason (R): There is a direct relationship between LRR and the value of money multiplier
This reason is false. While there is a relationship between the legal reserve ratio and the value of the money multiplier, it is an inverse relationship, not a direct one. As mentioned earlier, a higher reserve ratio leads to a smaller multiplier, and a lower reserve ratio leads to a larger multiplier.
Therefore, the correct answer is option C: Assertion (A) is true but reason (R) is false.
Reason (R): There is a direct relationship between LRR and the value of money multiplier
Explanation:
The size of the multiplier refers to the extent to which an initial change in spending or investment leads to a larger final change in aggregate demand. The money multiplier is a measure of the potential increase in the money supply resulting from an increase in bank reserves.
LRR, or the legal reserve ratio, is the proportion of deposits that banks are required to hold as reserves. When banks receive deposits, they are required to keep a certain percentage of those deposits as reserves and can lend out the rest. The inverse of LRR represents the multiple by which bank deposits can expand through the lending process.
Now, let's evaluate the given assertion and reason:
Assertion (A): Size of multiplier is given by the inverse of LRR
This assertion is true. The size of the multiplier is determined by the inverse of the legal reserve ratio. The higher the legal reserve ratio, the smaller the multiplier, and vice versa. This is because a higher reserve ratio means that banks can lend out a smaller portion of their deposits, resulting in a smaller increase in the money supply.
Reason (R): There is a direct relationship between LRR and the value of money multiplier
This reason is false. While there is a relationship between the legal reserve ratio and the value of the money multiplier, it is an inverse relationship, not a direct one. As mentioned earlier, a higher reserve ratio leads to a smaller multiplier, and a lower reserve ratio leads to a larger multiplier.
Therefore, the correct answer is option C: Assertion (A) is true but reason (R) is false.
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion (A): Size of multiplier is given by the inverse of LRRReason(R): There is direct relationship between LRR and value of money multipliera)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'C'. Can you explain this answer?
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion (A): Size of multiplier is given by the inverse of LRRReason(R): There is direct relationship between LRR and value of money multipliera)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'C'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion (A): Size of multiplier is given by the inverse of LRRReason(R): There is direct relationship between LRR and value of money multipliera)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion (A): Size of multiplier is given by the inverse of LRRReason(R): There is direct relationship between LRR and value of money multipliera)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'C'. Can you explain this answer?.
Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion (A): Size of multiplier is given by the inverse of LRRReason(R): There is direct relationship between LRR and value of money multipliera)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'C'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion (A): Size of multiplier is given by the inverse of LRRReason(R): There is direct relationship between LRR and value of money multipliera)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion (A): Size of multiplier is given by the inverse of LRRReason(R): There is direct relationship between LRR and value of money multipliera)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'C'. Can you explain this answer?.
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