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

,

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

(a)

Increase in the Cash Reserve Ratio in the banks.

(b)

Increase in the Statutory Liquidity Ratio in the banks.

(c)

Increase in the banking habit of the people.

(d)

Increase in the population of the country.

Explanation

The money multiplier effect can be seen in a country’s banking system. An increase in bank lending should translate to an expansion of a country’s money supply. Thus, the money multiplier in an economy increases with an increase in the banking habits of the people. Therefore, option (c) is the correct answer.