alleryMoney multiplier in an economy is given by:
AApproximately 1/(reserve ratio); for India, lies between 5 and 10 typically
B1/CRR (in simple model)
CMoney base
DCRR
Answer & Solution
Correct answer: B. 1/CRR (in simple model)
Simple money multiplier = 1/r where r = required reserve ratio.
e.g., CRR=10% → multiplier 10. Real multiplier lower due to: cash holdings by public, excess reserves by banks.
India's multiplier typically 5-7. Money supply = base × multiplier.
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