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Cash Flow from Investing Activities

The effect of...

Question

The effect of increase in CRR will be reduced or nullified if _________.

A

bank rate is reduced

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B

securities are sold in the open market

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C

SLR is increased

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D

people do not borrow from non-banking institutions

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Solution

The correct option is C bank rate is reduced
The effect of increased CRR will be reduced or nullified if bank rate is reduced because both are inverse functions. If CRR will increase it contracts credit and if bank rate reduced it expands credit.

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