{"id":91710,"date":"2025-06-01T11:04:04","date_gmt":"2025-06-01T11:04:04","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=91710"},"modified":"2025-06-01T11:04:04","modified_gmt":"2025-06-01T11:04:04","slug":"the-money-multiplier-in-an-economy-increases-with-which-one-of-the","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/the-money-multiplier-in-an-economy-increases-with-which-one-of-the\/","title":{"rendered":"The money multiplier in an economy increases with which one of the"},"content":{"rendered":"

The money multiplier in an economy increases with which one of the following?<\/p>\n

[amp_mcq option1=”Increase in the cash reserve ratio” option2=”Increase in the banking habit of the population” option3=”Increase in the statutory liquidity ratio” option4=”Increase in the population of the country” correct=”option2″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC IAS – 2019<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nThe correct answer is B) Increase in the banking habit of the population.
\n<\/section>\n
\nThe money multiplier is the ratio of the money supply to the monetary base (high-powered money). It is inversely related to the reserve ratio (CRR + SLR) and the public’s cash-to-deposit ratio. When the banking habit of the population increases, people hold less cash and deposit more money in banks. This reduces the cash-to-deposit ratio. With a lower cash-to-deposit ratio, a larger proportion of the monetary base is held as reserves by banks, enabling banks to create more credit and expand the money supply through the process of deposit multiplication, thereby increasing the money multiplier.
\n<\/section>\n
\nOptions A and C are incorrect because an increase in the Cash Reserve Ratio (CRR) or the Statutory Liquidity Ratio (SLR) forces banks to hold more reserves, reducing the funds available for lending and decreasing the money multiplier. Option D, an increase in the population, does not directly or necessarily increase the money multiplier; its effect would depend on how it influences other factors like banking habits or savings rates.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

The money multiplier in an economy increases with which one of the following? [amp_mcq option1=”Increase in the cash reserve ratio” option2=”Increase in the banking habit of the population” option3=”Increase in the statutory liquidity ratio” option4=”Increase in the population of the country” correct=”option2″] This question was previously asked in UPSC IAS – 2019 Download PDFAttempt Online … <\/p>\n

Detailed SolutionThe money multiplier in an economy increases with which one of the<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1092],"tags":[1119,1120,1190],"class_list":["post-91710","post","type-post","status-publish","format-standard","hentry","category-upsc-ias","tag-1119","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"\nThe money multiplier in an economy increases with which one of the<\/title>\n<meta name=\"description\" content=\"The correct answer is B) Increase in the banking habit of the population. The money multiplier is the ratio of the money supply to the monetary base (high-powered money). It is inversely related to the reserve ratio (CRR + SLR) and the public's cash-to-deposit ratio. When the banking habit of the population increases, people hold less cash and deposit more money in banks. This reduces the cash-to-deposit ratio. With a lower cash-to-deposit ratio, a larger proportion of the monetary base is held as reserves by banks, enabling banks to create more credit and expand the money supply through the process of deposit multiplication, thereby increasing the money multiplier.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/the-money-multiplier-in-an-economy-increases-with-which-one-of-the\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The money multiplier in an economy increases with which one of the\" \/>\n<meta property=\"og:description\" content=\"The correct answer is B) Increase in the banking habit of the population. The money multiplier is the ratio of the money supply to the monetary base (high-powered money). It is inversely related to the reserve ratio (CRR + SLR) and the public's cash-to-deposit ratio. When the banking habit of the population increases, people hold less cash and deposit more money in banks. This reduces the cash-to-deposit ratio. With a lower cash-to-deposit ratio, a larger proportion of the monetary base is held as reserves by banks, enabling banks to create more credit and expand the money supply through the process of deposit multiplication, thereby increasing the money multiplier.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/the-money-multiplier-in-an-economy-increases-with-which-one-of-the\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T11:04:04+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"The money multiplier in an economy increases with which one of the","description":"The correct answer is B) Increase in the banking habit of the population. 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