If the value/percentage of the cash reserve ratio falls, then the value of the money multiplier ________.
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Correct answer: D
Explanation
The correct answer is option 4 i.e. rises.
If the value/percentage of the cash reserve ratio (CRR) falls, then the value of the money multiplier rises.
The money multiplier is inversely related to the CRR. When the CRR decreases, banks are required to hold less cash in reserve, which allows them to lend more, thereby increasing the money supply. As a result, the money multiplier, which determines the total money supply created from an initial deposit, rises when the CRR falls.