UPSC CSE Prelims
Question 50
The money multiplier in an economy increases with which one of the following?
View correct answer and explanation
Correct answer: B
Correct Option: B
Explanation:
Wider use of banks reduces cash held outside the banking system and increases deposit creation, potentially raising the money multiplier for a given monetary base.
Option-wise Analysis:
A (Incorrect): A higher CRR forces banks to hold more reserves and generally reduces the multiplier.
B (Correct): Greater banking habits support deposits and multiple credit creation.
C (Incorrect): A higher SLR channels resources into prescribed liquid assets and generally limits loan expansion.
D (Incorrect): Population size has no necessary direct effect on the multiplier.