Option 1 -> Incorrect multiplier application.
Option 2 -> Uses correct money multiplier of 8 (1/0.125).
Option 3 -> Incorrect multiplier calculation.
Option 4 -> Incorrect multiplier calculation.
Hence, Option 2: ₹16000 -> The money multiplier is calculated as 1/RRR = 1/0.125 = 8. When initial deposits of ₹2000 are made, the total increase in money supply = ₹2000 × 8 = ₹16000. This represents the maximum amount of money that can be created through the banking system when banks lend out their excess reserves while maintaining the 12.5% reserve requirement-> correct