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

1. A

   Increase in the cash reserve ratio

   (a) A higher cash reserve ratio locks more cash with RBI and lowers the money multiplier. Not the key.

2. B

   Increase in the banking habit of the population

   (b) If more of the public banks its cash, the currency–deposit ratio falls and a larger share of high-powered money supports deposits and credit. The money multiplier rises. That is the official key.

3. C

   Increase in the statutory liquidity ratio

   (c) A higher statutory liquidity ratio ties up bank resources in eligible securities and reduces the multiplier. Not the key.

4. D

   Increase in the population of the country

   (d) A larger population does not, by itself, raise the multiplier; habits and reserve ratios do. Not the key.

Summary. Official key is (b). The money multiplier rises when people use banks more (lower currency–deposit ratio) and when reserve ratios fall. CRR and SLR hikes shrink it. Population size is not the lever. Honour (b).