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“Commercial banks are not only dealers of money but manufacturers of money and credit also.” Explain the statement.

      

“Commercial banks are not only dealers of money but manufacturers of money and credit also.” Explain the statement.

  

Answers


marlyne
By creating credit commercial banks contribute money supply in the economy.
They create credit in the form of derivative demand deposits . This derivative
demand deposits will be many times more than the initial primary deposits.
If primary deposits in a bank is 1000 and CRR is 10%, the demand deposits created
by the banking system will be 10,000. (Explain with balance sheets of two or three
banks).
marlinbito answered the question on May 12, 2018 at 13:21


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