Question

If the total credit created by the banks is ₹ 500 and Reserve Ratio is 20\%, the value of primary deposits would be ________ .

• A. ₹200
• B. ₹300
• C. ₹100
• D. ₹500

Hint:

To find primary deposits, multiply total credit by the reserve ratio (or use the formula: Primary Deposits = Total Credit $\times$ Reserve Ratio).

Answer 1

The Correct Option is C

\[\text{The formula for total credit is: } \text{Total Credit} = \frac{\text{Primary Deposits}}{\text{Reserve Ratio}}.\] \text{Substitute the values:}
\[500 = \frac{X}{0.20}, \quad \text{where X is the primary deposits.}\] \text{Solving for X:}
\[X = 500 \times 0.20 = ₹ 100.\]