In order to encourage investment in the economy, the Central Bank may ____.
In order to encourage investment in the economy, the Central Bank may ____.
(a) Reduce Cash Reserve Ratio
(b) Increase Cash Reserve Ratio
(c) Sell Government securities in open market
(d) Increase Bank Rate
Anurag Pathak Changed status to publish January 3, 2024
Ans – (a)
Explanation:-
Cash Reserve Ratio (CRR):
It refers to the minimum percentage of net demand and time liabilities, to be kept by commercial banks with the central bank.
A change in CRR affects the ability of commercial banks to create credit.
For instance, a decrease in CRR increases the excess reserves of commercial banks and increases their credit-creating power.
As loans are available at a low interest rate. it will encourage businesses and investors to take loans for investment purposes.
An increase in CRR will have the opposite effect.
Anurag Pathak Changed status to publish January 3, 2024
