Assertion (A): A cut in the CRR raises the money multiplier.
Reason (R): With a lower CRR, banks keep less of each deposit as reserves and lend more of it.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

The multiplier is 1 ÷ reserve ratio, so a lower ratio raises it. R explains A.

Concept: CRR and the multiplier
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsCRR and SLR

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Assertion (A): A cut in the CRR raises the money multiplier.Reason (R): With a lower CRR, banks keep less of each deposit as reserves and lend more of it.

Explanation

Assertion (A): A cut in the CRR raises the money multiplier.
Reason (R): With a lower CRR, banks keep less of each deposit as reserves and lend more of it.