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    Question

    If the cash reserve ratio (CRR) decreases, what will

    happen to credit creation?
    A Increase Correct Answer Incorrect Answer
    B Decrease Correct Answer Incorrect Answer
    C No change Correct Answer Incorrect Answer
    D First decrease, then increase Correct Answer Incorrect Answer

    Solution

    A lower CRR means banks are required to hold fewer reserves, allowing them to lend more. This increases the money supply and boosts credit creation in the economy.

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