Question

If CRR in the economy is 5% and initial deposit in the commercial banks is ₹50,000, what will be the money multiplier and what will be the money supply in the economy.

Answer 1

Money Multiplier:$\frac{1}{0.05}$

Money Multiplier = 20

The money supply in the economy will be: $20 \times 50000 = 1000000$