Arrange the following steps of Money Multiplier Process :
A. B comes to the bank for a loan.
B. C deposits all the money into a commercial bank.
C. A deposits money in a commercial bank.
D. B spends the money which becomes the income of C.
E. Commercial bank keeps CRR and give loan to B.
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 3
The correct answer is option (3) : C→A→E→D→B
A deposits money in a commercial bank (C): This initiates the process by introducing new money into the banking system.
B comes to the bank for a loan (A).
Commercial bank keeps CRR and give loan to B (E).
B spends the money which becomes the income of C (D).
C deposits all the money into a commercial bank. (B) continuing the multiplier cycle.