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Question
What are the determinants of money supply?
Solution
Determinants of Money Supply:
- Currency Deposit Ratio (CDR); It is the ratio of money held by the public in currency to that they hold in bank deposits.
- Reserve deposit ratio (RDR); Reserve Money consists of two things (a) vault cash in banks and (b) deposits of commercial banks with RBI.
- Cash Reserve Ratio (CRR); is the fraction of the deposits the banks must keep with RBI. (z’v) Statutory Liquidity Ratio (SLR); It is the fraction of the total demand and time deposits of the commercial banks in the form of specified liquid assets.
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