The money multiplier in an economy increases with which one of the following?
Increase in the Cash Reserve Ratio in the banks
Increase in the Statutory Liquidity Ratio in the banks
Increase in the banking habit of the people
Increase in the population of the country
Answer is Wrong!
Answer is Right!
This question was previously asked in
UPSC IAS – 2021
An increase in the banking habit of people means they prefer to hold less cash and deposit more money in banks, leading to a decrease in the Currency Ratio. A lower Currency Ratio in the money multiplier formula results in a higher money multiplier.