Correct answer: (c) Increase in the banking habit of the people
Explanation
- A
Increase in the Cash Reserve Ratio in the banks
Higher CRR. Ties up cash; multiplier falls.
- B
Increase in the Statutory Liquidity Ratio in the banks
Higher SLR. Same direction — more idle reserves.
- C
Increase in the banking habit of the people
Increase in the banking habit. More deposits inside banks, less cash leakage — multiplier rises.
- D
Increase in the population of the country
Population increase. Not a multiplier parameter.
Summary. Official key is (c). The money multiplier rises when people hold more of their money as bank deposits (banking habit) rather than cash. CRR and SLR increases shrink it.
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