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

1.	The money multiplier in an economy increases with which one of the following?1. Increase in the Cash Reserve Ratio in the banks2. Increase in the Statutory Liquidity Ratio in the banks3. Increase in the banking habit of the people4. Increase in the population of the country
Answer» Correct Answer - Option 3 : Increase in the banking habit of the people The correct answer is Increase in the banking habit of the people. The monetary base (or M0) is the total amount of a currency that is either in general circulation in the hands of the public or in the form of commercial bank deposits held in the central bank's reserves. An increase in banking activity will lead to more money in the bank’s hands in the form of Time Deposits (FD, RD), Demand Deposits (Savings Bank Account), Cash, etc, thus increase in banking habits of the people will increase the money multiplier. Banks create money by making loans. A bank loans or invests its excess reserves to earn more interest. When people start depositing more into banks. The banks can lend even more.

The money multiplier in an economy increases with which one of the following?1. Increase in the Cash Reserve Ratio in the banks2. Increase in the Statutory Liquidity Ratio in the banks3. Increase in the banking habit of the people4. Increase in the population of the country

Answer» Correct Answer - Option 3 : Increase in the banking habit of the people

The correct answer is Increase in the banking habit of the people.

The monetary base (or M0) is the total amount of a currency that is either in general circulation in the hands of the public or in the form of commercial bank deposits held in the central bank's reserves.
An increase in banking activity will lead to more money in the bank’s hands in the form of Time Deposits (FD, RD), Demand Deposits (Savings Bank Account), Cash, etc, thus increase in banking habits of the
people will increase the money multiplier.
Banks create money by making loans. A bank loans or invests its excess reserves to earn more interest.
When people start depositing more into banks. The banks can lend even more.