Q16 of 39 Page 1

Define ‘money multiplier’.

Money multiplier refers to the system where the primary cash deposit held in the banking system lead to the creation of multiple deposits.

Money multiplier= total deposit/ primary cash deposit


or Money multiplier = 1/ Legal reserve ratio.


More from this chapter

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14

In order to encourage investment in the economy, the Central Bank may

___________. (Choose the correct alternative)


(a) Reduce Cash Reserve Ratio


(b) Increase Cash Reserve Ratio


(c) Sell Government securities in open market


(d) Increase Bank Rate


 15

What do you mean by a direct tax?

OR


What do you mean by an indirect tax?


 17

Calculate the change in final income, if Marginal Propensity to Consume (MPC) is 0 �8 and change in initial investment is < 1,000 crores.

 18

State the impact of ‘‘Excess Demand’’ under the Keynesian theory on

employment, in an economy.


OR


State the meaning of the following :


(a) Ex-Ante Savings


(b) Full Employment


(c) Autonomous Consumption