Q24 of 50 Page 1

Explain the role of the cash reserve ratio in controlling credit creation.

The role of cash reserve ratio in controlling credit creation is mentioned below:

● Cash Reserve Ratio or CRR is the percentage of deposits which commercial banks keep with the central banks, in accordance with the law.


● If the CRR is increased, the banks have to keep a higher share of deposits in the central banks.


● This will reduce the funds kept with them to give out as loans.


● Thus, the level of credit creation reduces.


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21

An economy is in equilibrium. Find investment expenditure.

National income = 1200


Autonomouns consumption expenditure = 150


Marginal propernsity to consumer = 0.8

 22

If nominal income is Rs 500 and the price index is 125, calculate the real income.

 27

Calculate net national product at a market price and private income

Net Current transfer to abroad 10


Private final consumption expenditure 500


Current transfer from government 30


Net factor income to abroad 20


Net export -20


Net indirect tax 120


National debt interest 70


Net domestic capital formation 80


Income accruing to government 60


Government final consumption expenditure 100

 5

When does the shift in the supply curve take place?