Which of the following statements about the Currency Deposit Ratio (CDR) is INCORRECT?

Correct Answer: During the festive season, the CDR typically declines.

Subject: economics

• It is the ratio of money held by the public in currency to that they hold in bank deposits.
• It reflects people's preference for liquidity.
• During the festive season, the CDR typically declines.
• It is a behavioural parameter affected by interest rates.

Explanation: • <b>Key Fact</b> The Currency Deposit Ratio (CDR) typically INCREASES during the festive season, not declines. • <b>Supporting Detail</b> This happens because people convert their bank deposits into cash balances for extra expenditures during festivals. • <b>Related Concept</b> The CDR is represented by the formula: CU/DD (Currency / Demand Deposits). • <b>Why wrong options are wrong</b> Options A, B, and D are all perfectly correct definitions and characteristics of CDR. • <b>Exam Trick</b> Festival = Shopping = More Cash Needed = High Currency relative to Deposits (CDR rises). • <b>Additional Info</b> The ratio is strongly affected by behavioural patterns, economic conditions, and inflation.

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