Multiple Choice Questions on An increase in the Cash Reserve Ratio CRR by the RBI is likely to lead to ........ for UPSC Civil Services Examination (General Studies) Preparation

Back to Main Page

Multiple Choice Questions

An increase in the Cash Reserve Ratio CRR by the RBI is likely to lead to ........

Economic Affairs Money Supply and Monetary Policy
    Download Solution PDF

    An increase in the Cash Reserve Ratio (CRR) by the RBI , is likely to lead to

    Lower interest rates

    Incorrect Answer

    Reduction in fiscal deficit

    Incorrect Answer

    Increase in Foreign Portfolio Investment

    Incorrect Answer

    Lower lending by banks

    Correct Answer
    छोटे Courses बड़े Results
    Master Money Supply and Monetary Policy
    Prepare through Micro-courses
    Try Now
    Explanation:
    • If RBI decides to increase CRR, banks will keep more cash with RBI and lend less. Lower money circulation would reduce economic activity. So, d is correct.
    • Fiscal deficit depends on government’s receipts and expenditures. CRR does not have a direct bearing on fiscal deficit. So, b is wrong.
    • FPI depends on interest rates in the country and general investment climate. Even though higher may push up interest rates, the transmission is very slow as interest rates do not change suddenly due to a CRR hike. So, c is incorrect

    By: Kritika Kaushal
    ProfileResources

    Let's Discuss

    Master
    Money Supply and Monetary Policy
    With abhipedia
    Micro Courses
    Try Now
    What our students have to say
    Review on us
    Download Abhipedia Android App

    Access to prime resources

    Downlod from playstore
    download android app download android app for free