Question

Value of money multiplier ____ with an increase in cash reserve ratio

Answer 1

value of money multiplier (K)decrease with an increase in CAsh reserve ratio

Explanation:

if we take 10%of cash reserve ratio

K=1/10%

K=100/10

=10

but if we increase CRR to 25%

then,

K=1/25%

K=100/25

=4

so,we can conclude that as cash reserve ratio increase ,the value of money multiplier will decrease.

I hope this will help you!