JAMB Economics 2009 Objective — Question 28
Question 28 of 50 from the Joint Admissions and Matriculation Board (JAMB) Economics 2009 Objective paper, with the correct answer and a full explanation.
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The ability of commercial banks to create money depends on the
- A. reserve ratioCorrect
- B. liquidity ratio
- C. interest rate
- D. capital base
Explanation
The reserve ratio is the percentage of the customer's deposit that commercial banks are required to keep with the Central Bank. This ratio determines what will be left for the commercial bank to give out as loans because they create money only by giving out loans to customers.
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