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Suppose, for a hypothetical… (Class 12 Economics 2026, Q8)

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EconomicsCBSE Class 12 · Board exam 2026, set 58/5/1 · 1 mark · MCQ

CBSE Class 12 Economics 2026: question 8

Set in the CBSE Class 12 board exam of 2026, paper 58/5/1, section A, question 8, for 1 mark. Try it first; the hints and our step-by-step solution are below.

Q8 · 1 mark · MCQMoney and Banking

Suppose, for a hypothetical economy, Reserve Ratio (RR) decreases from 25% to 20%, the total deposits would ___________ to ₹ ___________, if primary deposits are ₹ 1,000. (Choose the correct option to fill in the blanks)

  1. (A)increase, 5,000
  2. (B)decrease, 5,000
  3. (C)increase, 4,000
  4. (D)decrease, 4,000

Source: official question paper from cbse.gov.in (PDF). See it in the full 2026 board paper, set 58/5/1.

Hints

Open one hint at a time and try again before the next.

Hint 1

Money multiplier = 1 / reserve ratio.

Hint 2

Compare the deposits at 25% and at 20%.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. Total deposits = Primary deposits × 1/RR. At RR = 25%: 1,000 × 1/0.25 = ₹ 4,000.

  2. At RR = 20%: 1,000 × 1/0.20 = ₹ 5,000. A lower reserve ratio raises the money multiplier, so total deposits increase to ₹ 5,000. Option (A).

    1 mark

Answer: (A) increase, 5,000

Where the marks are

  • Deposits = 1,000 / 0.2 = 5,000 (1 mark)

Revise the chapter

  • Chapter: Money and Banking (notes, formulas, where marks are lost and every past question)
Practise this chapterBoard-style questions from Money and Banking, one at a time, marked against the answer key and marking points.Back to the full paper2026 board paper, set 58/5/1: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.