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UPSC 2019: The money multiplier in an economy increases with which one of the following?
(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
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Not attemptedCorrect Answer: (b) Increase in the banking habit of the population
The money-multiplier m = 1 / (c + r), where c is the currency-deposit ratio and r is the reserve ratio. When the population’s banking habit rises, people hold relatively less currency and keep more funds in bank deposits, so c falls and the denominator shrinks, raising m. Raising CRR or SLR would raise r and lower the multiplier, while population size by itself does not change the ratios. ([prepp.in](https://prepp.in/question/the-money-multiplier-in-an-economy-increases-with-61558ac2ac44ac4586d962a3?utm_source=openai))
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Frequently Asked Questions
What is the correct answer to this UPSC 2019 Indian Economy question?▼
The correct answer is option (b): Increase in the banking habit of the population. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this Monetary Policy & Money Supply question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2019, GS Paper 1, as Question 90. It falls under Indian Economy > Monetary Policy & Money Supply.
What is the difficulty level of this UPSC question?▼
This question is rated "moderate". It requires sound conceptual understanding of the topic.
How many UPSC Prelims questions have been asked from Monetary Policy & Money Supply?▼
UPSC has asked 27 questions from Monetary Policy & Money Supply (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.