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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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.
Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.
- 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 'B'. Can you explain this answer?
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Directions: In the following questions, a statement of assertion (A) ...
Fractional-reserve banking is the system of banking operating in almost all countries worldwide, under which banks that take deposits from the public are required to hold a proportion of their deposit liabilities in liquid assets as a reserve, and are at liberty to make loans to borrowers of the balance.Bank reserves are held as cash in the bank or as balances in the bank's account at the central bank. The country's central bank determines the minimum amount that banks must hold in liquid assets, called the "reserve requirement" or "reserve ratio". Most commercial banks hold more than this minimum amount as excess reserves.
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Directions: In the following questions, a statement of assertion (A) ...
Assertion (A): In order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash reserves.
Reason (R): A change in reserve requirement affects the power of commercial banks to create credit.
Explanation:
Understanding the Assertion:
- The assertion states that commercial banks only need to keep a small portion of deposits as cash reserves to maintain the faith of depositors in the banking system.
- This implies that commercial banks do not need to keep all deposits as cash reserves, and they can use the remaining funds for lending and investment purposes.
Understanding the Reason:
- The reason states that a change in reserve requirement affects the power of commercial banks to create credit.
- Reserve requirement refers to the percentage of deposits that commercial banks are required to keep as cash reserves.
- When the reserve requirement is increased, commercial banks have to keep a larger portion of deposits as cash reserves, reducing the funds available for lending and investment.
- Conversely, when the reserve requirement is decreased, commercial banks have more funds available for lending and investment, increasing their power to create credit.
Analysis:
- Both the assertion and the reason are true.
- Commercial banks indeed keep only a small part of deposits as cash reserves to maintain the faith of depositors in the banking system.
- The reason is also true as a change in reserve requirement directly impacts the lending and investment capacity of commercial banks.
Explanation of Correct Answer:
- The correct answer is option 'B': Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).
- While both the assertion and reason are true, the reason does not provide a direct explanation for the assertion.
- The reason explains the impact of a change in reserve requirement on the credit creation power of commercial banks but does not directly address the concept of maintaining depositor faith.
Conclusion:
- It is important for commercial banks to maintain the faith of depositors in the banking system.
- They do this by keeping only a small part of deposits as cash reserves and using the remaining funds for lending and investment.
- A change in reserve requirement does affect the power of commercial banks to create credit, but it is not the direct explanation for the sufficiency of keeping a small part of deposits as cash reserves.
Reason (R): A change in reserve requirement affects the power of commercial banks to create credit.
Explanation:
Understanding the Assertion:
- The assertion states that commercial banks only need to keep a small portion of deposits as cash reserves to maintain the faith of depositors in the banking system.
- This implies that commercial banks do not need to keep all deposits as cash reserves, and they can use the remaining funds for lending and investment purposes.
Understanding the Reason:
- The reason states that a change in reserve requirement affects the power of commercial banks to create credit.
- Reserve requirement refers to the percentage of deposits that commercial banks are required to keep as cash reserves.
- When the reserve requirement is increased, commercial banks have to keep a larger portion of deposits as cash reserves, reducing the funds available for lending and investment.
- Conversely, when the reserve requirement is decreased, commercial banks have more funds available for lending and investment, increasing their power to create credit.
Analysis:
- Both the assertion and the reason are true.
- Commercial banks indeed keep only a small part of deposits as cash reserves to maintain the faith of depositors in the banking system.
- The reason is also true as a change in reserve requirement directly impacts the lending and investment capacity of commercial banks.
Explanation of Correct Answer:
- The correct answer is option 'B': Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).
- While both the assertion and reason are true, the reason does not provide a direct explanation for the assertion.
- The reason explains the impact of a change in reserve requirement on the credit creation power of commercial banks but does not directly address the concept of maintaining depositor faith.
Conclusion:
- It is important for commercial banks to maintain the faith of depositors in the banking system.
- They do this by keeping only a small part of deposits as cash reserves and using the remaining funds for lending and investment.
- A change in reserve requirement does affect the power of commercial banks to create credit, but it is not the direct explanation for the sufficiency of keeping a small part of deposits as cash reserves.
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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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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Here you can find the meaning 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice 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 ) : in order to maintain the faith of depositors in the banking system, it is sufficient for the commercial banks to keep only a small part of deposits as cash Reserves.Reason ( R ) : A change in Reserve requirement affects the power of commercial bank to create the credit.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 'B'. Can you explain this answer? tests, examples and also practice Commerce tests.
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