The money multiplier in an economy increases with which one of the following?
[UPSC Civil Services Exam – 2019 Prelims]
(a) Increase in the cash reserve ratio
(b) Increase in the banking habit of the population
(c) Increase in the statutory liquidity ratio
(d) Increase in the population of the country
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.