Suppose a bank has an initial deposit of ₹200. The required cash reserve ratio is 20%. Then what will be the total money supply in an economy?

1000

The correct answer is Option (3) → 1000

Given:

• Initial deposit = ₹200

• CRR = 20 percent or 0.20

Money Multiplier= 1 /CRR

Money Multiplier= 1 / 0.20 = 5

Total Money Supply=Initial Deposit×Money Multiplier

                                =200×5=1000