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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 ) The central bank issues currency on the basis of CRR.
Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.
- 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 'D'. Can you explain this answer?
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Directions: In the following questions, a statement of assertion (A) ...
Money or Credit Creation by Commercial Banks Commercial banks increases the flow of money in an economy by credit creation. This process of credit creation is an outcome of its two primary functions, i.e. acceptance of loans and advancement of deposits. The banks issue loans from their cash reserves with the confidence on their historical experience that all depositors will not withdraw their funds at the same time. In this way, commercial banks create credit many more times than their cash reserves and contributes to increase money supply in the economy. It depends on initial level of deposits and money multiplier.
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Directions: In the following questions, a statement of assertion (A) ...
Assertion (A): The central bank issues currency on the basis of CRR.
Reason (R): The CRR impacts credit creation capacity of the commercial bank.
The correct answer is option 'D' - Assertion (A) is false but reason (R) is true. Let's discuss the statement and reason in detail.
Explanation:
The Cash Reserve Ratio (CRR) is the percentage of total deposits that commercial banks are required to maintain as reserves with the central bank. The central bank uses the CRR as a monetary policy tool to control the liquidity in the banking system.
Assertion (A): The central bank issues currency on the basis of CRR.
This assertion is false. The central bank does not issue currency on the basis of the CRR. The central bank is responsible for the issuance and management of currency in the economy, but the CRR is not directly related to the issuance of currency. The central bank issues currency based on the demand for money in the economy, economic conditions, and the need for currency circulation.
Reason (R): The CRR impacts credit creation capacity of the commercial bank.
This reason is true. The CRR impacts the credit creation capacity of commercial banks. When commercial banks receive deposits from customers, they are required to maintain a certain percentage of these deposits as reserves with the central bank. The remaining portion of the deposits is available for lending and credit creation by the banks. Therefore, the CRR directly affects the amount of money that banks can lend out and, subsequently, the credit creation capacity of the banks.
By adjusting the CRR, the central bank can control the liquidity in the banking system. A higher CRR means banks have to keep a larger portion of their deposits as reserves, which reduces the amount of money available for lending and credit creation. Conversely, a lower CRR allows banks to keep a smaller portion of their deposits as reserves, thereby increasing the amount of money available for lending and credit creation.
In conclusion, the assertion that the central bank issues currency on the basis of CRR is false. However, the reason that the CRR impacts the credit creation capacity of commercial banks is true.
Reason (R): The CRR impacts credit creation capacity of the commercial bank.
The correct answer is option 'D' - Assertion (A) is false but reason (R) is true. Let's discuss the statement and reason in detail.
Explanation:
The Cash Reserve Ratio (CRR) is the percentage of total deposits that commercial banks are required to maintain as reserves with the central bank. The central bank uses the CRR as a monetary policy tool to control the liquidity in the banking system.
Assertion (A): The central bank issues currency on the basis of CRR.
This assertion is false. The central bank does not issue currency on the basis of the CRR. The central bank is responsible for the issuance and management of currency in the economy, but the CRR is not directly related to the issuance of currency. The central bank issues currency based on the demand for money in the economy, economic conditions, and the need for currency circulation.
Reason (R): The CRR impacts credit creation capacity of the commercial bank.
This reason is true. The CRR impacts the credit creation capacity of commercial banks. When commercial banks receive deposits from customers, they are required to maintain a certain percentage of these deposits as reserves with the central bank. The remaining portion of the deposits is available for lending and credit creation by the banks. Therefore, the CRR directly affects the amount of money that banks can lend out and, subsequently, the credit creation capacity of the banks.
By adjusting the CRR, the central bank can control the liquidity in the banking system. A higher CRR means banks have to keep a larger portion of their deposits as reserves, which reduces the amount of money available for lending and credit creation. Conversely, a lower CRR allows banks to keep a smaller portion of their deposits as reserves, thereby increasing the amount of money available for lending and credit creation.
In conclusion, the assertion that the central bank issues currency on the basis of CRR is false. However, the reason that the CRR impacts the credit creation capacity of commercial banks is true.
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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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. 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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. 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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. 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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. 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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. 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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. 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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. Can you explain this answer?.
Solutions 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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. Can you explain this answer?, a detailed solution 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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. Can you explain this answer? has been provided alongside types of 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 ) The central bank issues currency on the basis of CRR.Reason ( R ) The CRR impacts credit creation capacity of the commercial bank.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 'D'. Can you explain this answer? theory, EduRev gives you an
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