Macro

Money & Banking

Medium

Suppose a bank has an initial deposit of ₹200. The required cash reserve ratio is 20%. Then what will be the total money supply in an economy?

✅ Correct Option: 3

Option 3: 1000 -> The money multiplier formula is 1/CRR = 1/0.20 = 5. Total money supply = Initial deposit × Money multiplier = ₹200 × 5 = ₹1000. When CRR is 20%, banks must keep 20% as reserves and can lend 80%. Through multiple rounds of deposits and lending, the initial deposit of ₹200 creates a total money supply of ₹1000 in the economy. -> correct

2022: 30 Aug Shift 2

In India currency notes are issued by _______.

2023: 29 May Shift 2

If all the depositors, one day come to withdraw all the cash, what would be role played by RBI?

2026: 21 May Shift 2

Which measure of money supply is least liquid among the following?

2025: 28 May Shift 2

Which initiatives strengthened the government's resolution to go cashless.

(A) Jan Dhan accounts.

(B) Aadhar enabled payment systems.

(D) National financial Switch.

Choose the correct answer from the options given below:

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2026: 11 May Shift 2

Arrange the following statements related to open market operations, a tool used by the Reserve Bank of India to control money supply in the economy, in the correct order of occurrence:

A. The total amount of reserves in the economy increases.

B. RBI buys government bonds.

C. As a result, money supply will increase.

D. RBI pays for the bonds by providing a cheque.

Choose the correct answer from the options given below:

Suppose a bank has an initial deposit of ₹200. The required cash reserve ratio is 20%. Then what will be the total money supply in an economy?

Solution

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