Question

When the cash reserve ratio (CRR) is increased
by the RBI, it will:
OPTIONS
Increase the supply of money in the
economy
Initially increase the supply but later on
decrease automatically
Decrease the supply of money in the
economy
No impact on the supply of money in the
economy​

Answer 1

Answer:

Thus, the Central Bank indirectly controls the money supply and influences short-term interest rates. ... Thus hike in CRR leads to an increase of interest rates on loans provided by the Banks. Reduction in CRR sucks money out of the system causing a decrease in the money supply