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    Question

    What is the ratio of money held by the public in

    currency to that held as deposits in commercial banks called?
    A Acid Test Ratio Correct Answer Incorrect Answer
    B Current Deposit Ratio Correct Answer Incorrect Answer
    C Current Ratio Correct Answer Incorrect Answer
    D Debt Equity Ratio Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    The currency deposit ratio shows the amount of currency that people hold as a proportion of aggregate deposits. An increase in cash deposit ratio leads to a decrease in money multiplier. An increase in deposit rates will induce depositors to deposit more, thereby leading to a decrease in Cash to Aggregate Deposit ratio. This will in turn lead to a rise in Money Multiplier.

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