money multiplier



Mathematical relationship between the monetary base and money supply of an economy. It explains the increase in the amount of cash in circulation generated by the banks' ability to lend money out of their depositors' funds. When a bank makes a loan, it 'creates' money because the loan becomes a new deposit from which the borrower can withdraw cash to spend. This money-creating power is based on the fractional reserve system under which banks are required to keep at hand only a portion (between 10 to 15 percent, typically 12 percent) of the depositors' funds. The rest may be converted into loans, thereby increasing the available cash by a factor that is a multiple of the initial deposit.

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  • Certain projects can feel like they will be a money multiplier if they work out so you should try to do your best on them.

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  • The senior economist verbally illustrated the money multiplier effect to be useful in the economic calculation of the money supply.

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  • It's nice and stuff man yeah really swell money multipliers take the money and make it into more money from loans yeah

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