(a) Increase in the cash reserve ratio in the banks
(b) Increase in the Statutory Liquidity Ratio in the banks
(c) Increase in the banking habits of the people
(d) Increase in the population of the country
Answer: c
Explanation:
High powered money: Refers to notes and coins issued by the government and RBI.
Money supply: Is total stock of monetary media.
As a standard concept money supply is composed of two elements:
- Currency with public
- Demand deposit with public
The relationship between High powered money and Money supply is determined by the money multiplier, i.e.,
Money multiplier (m) = Money supply (M)/ High powered money (H)
Size of money multiplier is determined by- (i) Cash Reserve Ratio of Banks; (ii) Currency-Deposit Ratio of public; together determine money multiplier.
Hence, option c is correct.
Read: Solved Economy PYQs With Explanation 2021 UPSC Prelims