A Deep Dive into the Money Multiplier Journey

A Deep Dive into the Money Multiplier Journey
Multiplier meaning, assumptions, formula, Factors affecting multiplier, Banks’s role in multiplier

What you will learn

Description

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What is the meaning of money multiplier?
What is the other name given to the term “money multiplier”?
What is the formula to calculate the money multiplier?
Which authority in the banking system decides the reserve ratio?
The money multiplier is typically a number between 1 and 10, but it can vary. Comment.
How banks contribute to the money multiplier process?
What is the meaning of excess reserves?
Whether there is direct relationship or inverse relationship between the reserve requirement ratio and money multiplier? Comment.
What effect occurs on money multiplier if the reserve requirement is raised by the Central Bank?
If the reserve requirement ratio stands reduced, what effect it will have on the money supply in the economy?
How to calculate the total deposits created when initial deposit and reserve ratios are given?
How to calculate the initial deposits when total deposited created by the commercial banks and the reserve requirement ratio are given?
What are some common simplifying assumptions associated with the money multiplier?
There are some assumptions associated with the concept of money multiplier. But these assumptions may not always hold true in the real-world banking system. Why?
What are those factors which may affect the money multiplier?