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The money multiplier in a single-bank fictional economy with cash reserve ratio CRR is

A1 − CRR
B1 + CRR
CCRR
D1 / CRR
Answer & Solution
Correct answer: D. 1 / CRR
Money multiplier = 1 / CRR. If CRR = 20% (0.2), multiplier = 5: a Rs 100 deposit can support up to Rs 500 of total deposits in the system.
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