Question : The cash reserve ratio(CRR) is a tool to control the money supply through which measure
I. Qualitative
II. Quantitative
Option 1: Only II
Option 2: Only I
Option 3: Neither I nor II
Option 4: Both I and II
Correct Answer: Only II
Solution : The correct answer is Only II .
A quantitative instrument for managing the money supply is the cash reserve ratio. One of the most significant elements of the RBI's monetary policy, which controls and regulates the money supply, inflation rate, and liquidity in the economy, is the CRR. To put it briefly, a high CRR indicates that the banks have less money available for lending and investment. Banks are required to hold less money with themselves and more with the RBI.
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