UPSC Prelims 2021— Question 81

The money multiplier is inversely related to reserve requirements such as CRR and SLR, all else equal. A greater banking habit increases the share of money held in deposits and can support deposit creation and the multiplier process. Population size alone does not mechanically increase the multiplier. Hence increased banking habits are the relevant factor. The final answer-key position for Set C identifies option C as the correct option. Option A — Increase in the Cash Reserve Ratio in the banks — is not correct because it does not satisfy the specific condition tested in the question; it represents an alternative that is contradicted, incomplete, or less precise than the accepted answer. Option B — Increase in the Statutory Liquidity Ratio in the banks — is not correct because it does not satisfy the specific condition tested in the question; it represents an alternative that is contradicted, incomplete, or less precise than the accepted answer. Option C — Increase in the banking habit of the people — is correct because it is the alternative that matches the constitutional, historical, geographical, scientific or economic principle established above. Option D — Increase in the population of the country — is not correct because it does not satisfy the specific condition tested in the question; it represents an alternative that is contradicted, incomplete, or less precise than the accepted answer. For PYQ interpretation, the distinction between the correct alternative and merely related facts is important. UPSC often places plausible distractors beside the precise statement that matches the underlying rule, chronology, definition or empirical relationship. The answer should therefore be read against the exact wording of the question rather than against a broadly related fact.