Skip to main contentSkip to solution

Arrange the following statements related to money multiplier process in correct sequence.

(A) The bank has Rs 140 as deposits.

(B) The bank has Rs 80 to lend.

(C) A bank has a initial deposits of Rs 100 and needs to keep reserves as 20 per cent.

(D) The bank lends 50% of lending amount to Sonia.

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 4

Option 4: (C), (B), (D), (A) -> The money multiplier process begins with statement (C) where the bank receives an initial deposit of Rs 100 and must maintain a 20% reserve requirement (Rs 20), leaving Rs 80 available for lending (B). The bank then lends 50% of this lending amount (Rs 40) to Sonia (D). When Sonia deposits this Rs 40 back into the banking system, it adds to the original Rs 100, resulting in total deposits of Rs 140 (A). This sequence demonstrates the expansion of money supply through the fractional reserve banking system. -> correct

Keyboard Shortcuts

  • Left arrow: Previous question
  • Right arrow: Next question
  • S key: Jump to solution
  • Q key: Jump to question