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

1. A

   Increase in the Cash Reserve Ratio in the banks

   Higher CRR. Ties up cash; multiplier falls.

2. B

   Increase in the Statutory Liquidity Ratio in the banks

   Higher SLR. Same direction — more idle reserves.

3. C

   Increase in the banking habit of the people

   Increase in the banking habit. More deposits inside banks, less cash leakage — multiplier rises.

4. 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.