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

The correct answer is B. The money multiplier is roughly (1 + c) / (r + c + e), where c is the currency-to-deposit ratio, r is the cash reserve ratio and e is the excess reserve ratio held by banks. When people keep more of their money in bank deposits and less in cash, c falls and the multiplier rises. A growing banking habit therefore pushes it up.

• A is wrong: A higher CRR raises the reserve requirement in the denominator, so banks can create less credit and the multiplier shrinks. CRR is set by the RBI under the RBI Act, 1934.
• C is wrong: A higher SLR forces banks to park more deposits in approved securities, reducing the funds available for lending. This lowers the multiplier.
• D is wrong: Population has no direct place in the formula. More people does not by itself change how much banks can lend against a given reserve base.

Core concept: deposit creation by banks and the reserve-based limit on it. For Mains, this links to financial inclusion (Jan Dhan accounts deepening the banking habit) and to how CRR and SLR transmit monetary policy into credit growth.

Trap: candidates see the word 'increase' and pick the option that sounds like growth. Raising CRR or SLR always reduces the multiplier, and the multiplier depends on how the public holds money, not on how many people there are.