Here is Question No. 90 a part of our series on UPSC Prelims 2019
Q90. 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 habits of the population
(c) Increase in the statutory liquidity ratio
(d) Increase in the population of the country
Answer: B
- The money multiplier is the maximum amount of broad money (M3 Money) that could be created by commercial banks for a given fixed amount of base money or reserve ratios. Or, simply it can be stated that the maximum amount of money that the banking system generates with each rupee of reserves.
- In the above-mentioned four situations, only the increase in the banking habit of the population will increase the money multiplier as only when the deposits come into the banking system, they can be used by the banks to create more Money.
For UPSC Prelims Resources, Click here
For Daily Updates and Study Material:
Join our Telegram Channel – Edukemy for IAS
- 1. Learn through Videos – here
- 2. Be Exam Ready by Practicing Daily MCQs – here
- 3. Daily Newsletter – Get all your Current Affairs Covered – here
- 4. Mains Answer Writing Practice – here
Visit our YouTube Channel – here
