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Loan Requirements

The gap betwe...

Question

The gap between money in hand and money in demand is bridged by banks with the help of reserves.

A

True

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B

False

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Solution

The correct option is B False

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Q. How do banks bridge the gap between the money in hand and the money in demand?

Q. High powered money includes the cash reserves of commercial banks and the currency held by public.

Q. Consider the following components of money supply in India:
1. Currency in circulation
2. Banker's deposits with the NBI
3. Other deposits with the RBI
4. Demand deposits of banks
Which of the above are the components of Reserve Money?

Q. Which of the following statements about banking operations is correct as they help banks to run their shops?
A. The public holds as much currency (M) as it desires to hold with it and therefore any additional money earned by it is placed in the form of deposits with banks.
B. The banks lend all the deposits received by them from public up to the minimum legal cash reserve ratio requirement determined by the RBI. It means banks do not keep any excess cash reserves with themselves.
C. The minimum legal Cash Reserve ratio is set by the RBI.
D. Bank's assets are only in the form of Cash Reserves and loans and its liabilities comprise only of the demand deposits.

Q. The money people hold in hand and bank accounts denotes the money supply in the economy.

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