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Question

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

Answer:

B

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Explanation:

When more people deposit their money in banks and use banking services, it leads to an increase in the deposit base of banks. This, in turn, increases the potential for banks to create more loans and expand the money supply through the lending process, thereby increasing the money multiplier effect.

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