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UPSC 2021: 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
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Not attemptedCorrect Answer: (c) Increase in the banking habit of the people
During a recession the government pursues expansionary fiscal policy; raising public-project expenditure directly injects demand, creating jobs and triggering a multiplier effect. The other options either tighten fiscal/monetary conditions or contract spending and would deepen, not alleviate, recessionary pressures. ([vajiramandravi.com](https://vajiramandravi.com/upsc-exam/which-among-the-following-steps-is-most-likely-to-be-taken-at-the-time-of-an-economic-recession/?utm_source=openai))
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Frequently Asked Questions
What is the correct answer to this UPSC 2021 Indian Economy question?▼
The correct answer is option (c): Increase in the banking habit of the people. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this Fiscal Policy & Budget question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2021, GS Paper 1, as Question 11. It falls under Indian Economy > Fiscal Policy & Budget.
What is the difficulty level of this UPSC question?▼
This question is rated "easy". It tests basic recall and most well-prepared aspirants should answer it correctly.
How many UPSC Prelims questions have been asked from Fiscal Policy & Budget?▼
UPSC has asked 41 questions from Fiscal Policy & Budget (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.