Assertion (A): The RBI can change the amount banks are able to lend by changing the CRR.
Reason (R): The CRR fixes the share of deposits that banks must keep with the RBI and cannot lend.

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

Raising the CRR locks up more of each deposit; cutting it frees funds for loans.
R explains A.

Concept: CRR as a lever
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsReserves and the reserve ratio

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Assertion (A): The RBI can change the amount banks are able to lend by changing the CRR.Reason (R): The CRR fixes the share of deposits that banks must keep with the RBI and cannot lend.

Explanation

Assertion (A): The RBI can change the amount banks are able to lend by changing the CRR.
Reason (R): The CRR fixes the share of deposits that banks must keep with the RBI and cannot lend.