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Question
Credit money is increased when CRR:
Options
Falls
Rises
Both falls and rises
None of the above
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Solution
Falls
Explanation:
Credit money rises when the Cash Reserve Ratio (CRR) or General Reserve Ratio (GRR) falls. When the central bank lowers the reserve ratio, commercial banks have more funds to lend, boosting credit creation in the economy. When the reserve ratio grows, banks must keep more funds in reserve, limiting their ability to lend and cutting credit money.
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| Column A | Column B | ||
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| (iii) | Deposits payable by bank on demand | C. | Initial deposit |
| (iv) | Deposits the amount of which can be withdrawn only after a fixed period of time | D. | Secondary deposit |
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