If Cash Reserve Ratio is 20%, what will

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Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Money and Banking

Question:

If Cash Reserve Ratio is 20%, what will be the value of money multiplier?

Options:

0.2

Correct Answer:

Explanation:

Money Multiplier (M)= 1/CRR

Given that the Cash Reserve Ratio is 20%, we can plug in $CRR = 0.2$ into the formula:

$M =1/ 0.2$

Evaluating the expression, we get:

$M = 5$

Therefore, the value of the money multiplier when the Cash Reserve Ratio is 20% is 5.