Which of the statements gives a true picture of the effect of lowering the cash reserve ratio by the central bank of a country?

CA Foundation · Business Economics · RTP · January 2025
Which of the statements gives a true picture of the effect of lowering the cash reserve ratio by the central bank of a country?
(A) A. The lending capacity of commercial banks will increase
(B) B. The lending capacity of commercial banks will decrease
(C) C. The lending capacity of commercial banks may increase or decrease
(D) D. None of these

Suggested Answer and Working Notes:

Correct Answer: Option (A)

A. The lending capacity of commercial banks will increase

Topics: Money Market

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