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Consider the following statements regarding Currency Deposit Ratio (CDR).
  1. It is calculated only with respect to the Term deposits held by the public in banks.
  2. It reflects people’s preference for liquidity.
  3. It generally increases during the festive season.
Which of the above statements is/are correct?
  • a)
    1, 2 
  • b)
    1, 3 
  • c)
    2, 3 
  • d)
    1, 2, 3
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements regarding Currency Deposit Ratio (CD...
's preference for holding currency over depositing it in banks. It is an important determinant of the money multiplier in an economy.

All of the statements regarding Currency Deposit Ratio (CDR) are true.
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Community Answer
Consider the following statements regarding Currency Deposit Ratio (CD...
The currency deposit ratio (cdr) is the ratio of money held by the public in currency to that they hold in bank deposits. cdr = CU/DD. If a person gets Re 1 she will put Rs 1/(1 + cdr) in her bank account and keep Rs cdr/(1 + cdr) in cash. It reflects people’s preference for liquidity. It is a purely behavioural parameter which depends, among other things, on the seasonal pattern of expenditure. For example, cdr increases during the festive season as people convert deposits to cash balance for meeting extra expenditure during such periods.
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Consider the following statements regarding Currency Deposit Ratio (CDR). It is calculated only with respect to the Term deposits held by the public in banks. It reflects people’s preference for liquidity. It generally increases during the festive season.Which of the above statements is/are correct?a)1, 2b)1, 3c)2, 3d)1, 2, 3Correct answer is option 'C'. Can you explain this answer?
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