Money Multiplier and Monetary Economics

The money multiplier increases with an increase in the banking habit of the population. The money multiplier is calculated as 1/(Cash Reserve Ratio + Currency-Deposit Ratio). When more people use banks and deposit money (increasing banking habit), the currency-deposit ratio decreases, which increases the money multiplier. Option (a) is incorrect—increasing CRR decreases the multiplier. Option (c) is incorrect—increasing SLR decreases the multiplier. Option (d) is incorrect—population size does not directly affect the money multiplier. The money multiplier depends on the behavioral patterns of economic agents regarding currency holding and bank deposits, not on population size.

Answer: (b).