IAI's May,2015 exam Q16

Discussion in 'CT7' started by Hemant Rupani, Sep 8, 2015.

  1. Hemant Rupani

    Hemant Rupani Senior Member

    IAI's May,2015 Q16

    Following is the split of utilization of INR 100 earned in India:
    Investment of INR 25
    Tax of INR 10
    Import of INR 15
    Domestic consumption of INR 50
    The CRR is 10%. What is the value of Money multiplier?

    Edit: I got the answer :)
     
    Last edited: Sep 10, 2015
  2. Gaurav Kela

    Gaurav Kela Member

    Can you please explain how?
     
  3. Hemant Rupani

    Hemant Rupani Senior Member

    From 100, 15 goes to abroad for import.
    So, from those 100, 85 will roll... and then 85×0.85 so on.
    If you apply logic of Bank Money Multiplier, you'll see Money Multiplier =1/0.15
     

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