alleryIn the fictional balance sheet of the chapter, if CRR = 20% and initial reserves with the bank are Rs 100, the maximum deposits the system can support are
ARs 500
BRs 100
CRs 200
DRs 400
Answer & Solution
Correct answer: A. Rs 500
Multiplier 1/0.20 = 5
100 × 5 = Rs 500. Loans expand to Rs 400 and deposits total Rs 500 at equilibrium.
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