{"id":91839,"date":"2025-06-01T11:07:36","date_gmt":"2025-06-01T11:07:36","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=91839"},"modified":"2025-06-01T11:07:36","modified_gmt":"2025-06-01T11:07:36","slug":"the-money-multiplier-in-an-economy-increases-with-which-one-of-the-2","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/the-money-multiplier-in-an-economy-increases-with-which-one-of-the-2\/","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 in the banks” option2=”Increase in the Statutory Liquidity Ratio in the banks” option3=”Increase in the banking habit of the people” option4=”Increase in the population of the country” correct=”option3″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC IAS – 2021<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nThe money multiplier in an economy increases with an increase in the banking habit of the people.
\n<\/section>\n
\nThe money multiplier is the ratio of the money supply to the monetary base. It is influenced by the reserve requirements (CRR, SLR) and the public’s preference for holding currency versus deposits. The formula for the money multiplier is approximately (1 + Currency Ratio) \/ (Reserve Ratio + Currency Ratio). The Currency Ratio is the ratio of currency held by the public to demand deposits.
\nAn 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.
\n<\/section>\n
\nIncrease in CRR (A) increases the Reserve Ratio, decreasing the money multiplier. Increase in SLR (B) also increases the Reserve Ratio, decreasing the money multiplier. Increase in population (D) does not directly determine the money multiplier, though it can affect the total volume of money and economic activity.
\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 in the banks” option2=”Increase in the Statutory Liquidity Ratio in the banks” option3=”Increase in the banking habit of the people” option4=”Increase in the population of the country” correct=”option3″] This question was previously asked in UPSC … <\/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":[1110,1120,1190],"class_list":["post-91839","post","type-post","status-publish","format-standard","hentry","category-upsc-ias","tag-1110","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 money multiplier in an economy increases with an increase in the banking habit of the people. The money multiplier is the ratio of the money supply to the monetary base. It is influenced by the reserve requirements (CRR, SLR) and the public's preference for holding currency versus deposits. The formula for the money multiplier is approximately (1 + Currency Ratio) \/ (Reserve Ratio + Currency Ratio). The Currency Ratio is the ratio of currency held by the public to demand deposits. 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.\" \/>\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-2\/\" \/>\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 money multiplier in an economy increases with an increase in the banking habit of the people. The money multiplier is the ratio of the money supply to the monetary base. It is influenced by the reserve requirements (CRR, SLR) and the public's preference for holding currency versus deposits. The formula for the money multiplier is approximately (1 + Currency Ratio) \/ (Reserve Ratio + Currency Ratio). The Currency Ratio is the ratio of currency held by the public to demand deposits. 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.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/the-money-multiplier-in-an-economy-increases-with-which-one-of-the-2\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T11:07:36+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 money multiplier in an economy increases with an increase in the banking habit of the people. 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A lower Currency Ratio in the money multiplier formula results in a higher money multiplier.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/the-money-multiplier-in-an-economy-increases-with-which-one-of-the-2\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T11:07:36+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/the-money-multiplier-in-an-economy-increases-with-which-one-of-the-2\/","url":"https:\/\/exam.pscnotes.com\/mcq\/the-money-multiplier-in-an-economy-increases-with-which-one-of-the-2\/","name":"The money multiplier in an economy increases with which one of the","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2025-06-01T11:07:36+00:00","dateModified":"2025-06-01T11:07:36+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"description":"The money multiplier in an economy increases with an increase in the banking habit of the people. 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