Value of Money Multiplier ____ (increases/decreases/remains unchanged) with an increase in Cash Reserve Ratio
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Value of Money Multiplier ____ (increases/decreases/remains unchanged) with an increase in Cash Reserve Ratio.
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Value of Money Multiplier decreases (increases/decreases/remains unchanged) with an increase in Cash Reserve Ratio.
Explanation:-
Money Multiplier = 1/LRR
LRR consists of
1) Cash Reserve Ratio (CRR)
2) Statutory Liquidity Ratio (SLR)
That means:
Money Multiplier = 1/CRR + SLR
the denominator increases with the increase in the Cash Reserve Ratio
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