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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