Explanation
Option (a) is incorrect: An increase in the CRR means banks have to keep a larger portion of their deposits with the Re-serve Bank of India (RBI), reducing the funds available for lending. This leads to a decrease in the money multiplier.
Option (b) is incorrect: An increase in the SLR requires banks to hold a higher percentage of their deposits in the form of liquid assets like government securities, reducing their ability to lend. This also leads to a decrease in the money multiplier.
Option (c) is correct: When more people prefer banking and keep their money in banks instead of holding cash, it increases deposits in the banking system. This boosts banking activities like lending, which leads to a higher money multiplier as the deposits circulate through the system.
Option (d) is incorrect: While an increase in population may lead to more economic activity, it does not directly affect the money multiplier unless it translates into higher banking habits or changes in monetary policy.
Money Multiplier is a concept in monetary economics that measures the maximum amount of money that the banking system can generate with each unit of central bank money (base money or high-powered money).
Logic here for option C: More people use banks more deposits banks get more money to lend This is the raw material for money multiplication! Directly boosts money multiplier