2023 · Q29
If the Cash Reserve Ratio is lowered by the RBI, supply of money in the economy will:
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- Aremain unchanged.
- Bdecrease.
- Cincrease.
- Dhave ambiguous impact.
Explanation
The Cash Reserve Ratio is the fraction of deposits that banks must keep as balances with the RBI. Lowering it releases a larger share of deposits for lending, expanding credit creation through the money multiplier. The supply of money in the economy therefore increases. Hence option C.