The money multiplier in an economy increases with

• Money Banking

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

1. Increase in the cash reserve ratio
2. increase in the banking habit of the population
3. Increase in the statutory liquidity ratio
4. Increase in the population of the country

Answer

In fractional banking system, money multiplier is a key element. As more people start banking and depositing money into banks, banks can lend even more. Thus, it creates more money in the system.

The correct option is B.