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Land utilisation

  LAND UTILIZATION  Land is a scarce resource, whose supply is fixed for all practical purposes. At the same time, the demand for land for various competing purposes is continuously increasing with the increase in human population and economic growth.Land use pattern at any given time is determined by several factors including size of human and livestock population, the demand pattern, the technology in use, the cultural traditions, the location and capability of land, institutional factors like ownership pattern and rights scale regulation. Major Types of Land Utilization in India : As in all other countries, land in India is put to various uses. The utilization of land depends upon physical factors like topography, soil and climate as well as upon human factors such as the density of population, duration of occupation of the area,land tenure and technical levels of the people.There are spatial and temporal difference in land utilization due to the continued interplay of physical and
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CREDIT MULTIPLIER

CREDIT MULTIPLIER

Meaning of credit multiplier
In the process of multiple credit creation,the total amount of derivative deposits created by the banks will be a multiple of initial excess reserves.The ratio between the total amount of derivative deposits and the initial amount of excess reserves is known as credit multiplier.It is reciprocal of cash reserve ratio(r) and denoted by k.

Credit multiplier k =                                                  Total derivative deposits/Initial excess reserves

Credit multiplier k =                         1/ cash reserves ratio (r)

Assumptions
1)The cash reserve ratio remains constant through all the stages of credit creation process.
2)The banks adjust their assets in such a manner as to maintain a fixed relationship between their deposit liabilities and cash reserves.
3)There is no leakage in credit creation process.It means the excess reserves are turned into derivative through granting loans and the derivative deposits in turn  become primary deposits with the banks.
4)There is a well developed banking system in country and people having banking habits.
5)The central bank does not adopt any credit control policy.
6)There exist normal buisness conditions in the country.

Destruction of credit
Banks create credit by granting loans to public.Similarly, the banks can destroy credit by reducing loans .The extent of destruction of credit depends upon cash reserves ratio. Higher the cash reserve ratio,greater will be the destruction of credit and vice versa . 

Limitations of credit creation
a)The power to create credit is limited by the bank's cash.
b)The higher the cash reserve ratio ,the smaller will be the volume of credit creation.
c)The extent of credit creation depends on the availability of borrowers.Without borrowers,there is no credit creation.
d)The power of Bank to turn other assets into money is restricted by availablity of good securities.
e)The greater the excess reserves,the smaller the credit multiplier.
f)The cash withdrawal or currency drains reduces the power of the bank to create credit.
g)If some banks decide not to utilise their full capacity for credit creations ,they keep large cash reserves,then credit creations in the country will be limited.
h)The credit creations will be smaller during depression and larger during prosperity.



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