The money multiplier in an economy increases with which one of the following?

Options

1. Increase in the Cash Reserve Ratio in the banks
2. Increase in the Statutory Liquidity Ratio in the banks
3. Increase in the banking habit of the people
4. Increase in the population of the country

Correct Answer

Increase in the banking habit of the people

Explanation

When people deposit more of their savings in banks, the deposit base expands, leading to a higher credit creation capacity of banks and thus an increased money multiplier.

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