--%>

How commercial bank make money

How does a commercial bank make money?

Answer: Commercial banks are capable to make credit that is many times greater than deposits received by banks. Money creation or credit creation by the banks is found out by:

(i) The amount of initial deposits, and
(ii) The legal reserve ratio (abbreviated as LRR).

   Related Questions in Macroeconomics

  • Q : Greatest Consumer Surplus problem I

    I have a problem in economics on Greatest Consumer Surplus. Please help me in the following question. Usual Americans undoubtedly derive the greatest consumer surpluses from the: (i) Summer vacations. (ii) Jelly and Peanut butter. (iii) Gold jewellery

  • Q : Foreign trade eliminate deficient demand

    In what respect foreign trade will be helpful in eliminating the adverse economic influences of deficient demand? Answer: Export increases the demand for services a

  • Q : Would inflation targeting be a good

    Question: Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment?

    Q : Relevance of matter-SWOT analysis

    Relevance of matter: Relevance of matter is very much important while choosing any goals. Are the goals relevant to the vision of the company? A goal of having maximum number of customers seems fantabulous, however at the same time bank needs to make

  • Q : International trade the most frequently

    the most frequently asked question on foreign direct invetment

  • Q : Steps to analyze modifications in

    What are the Steps to analyze modifications in equilibrium?

  • Q : Supply use two market diagrams to

    use two market diagrams to explain how an increase in state subsidies to public colleges might affect tuition and enrollments in both public and private colleges?

  • Q : What is Supply schedule What is Supply

    What is Supply schedule and how it is related to supply curve?

  • Q : Interest receipt Why is interest

    Why is interest received classified as revenue receipt? Answer: Interest received is a revenue receipt since it does not build any liability nor it leads to the red

  • Q : Aggregate demand if government budget

    What occurs to aggregate demand if the government budget is in deficit? Answer: The deficit budget raises the aggregate demand since the deficit budget signifies th