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Multiplier Effect |
Also found in: Wikipedia, Hutchinson | 0.04 sec. |
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Multiplier Effect A measure of the change in a country's money supply that occurs as the result of banks' ability to lend. The multiplier effect is dependent on banks' required reserves, or the amount of money in deposits they are legally required to keep in-house. If a bank has a low reserve requirement, it is able to lend more of its deposit money, which in turn increases the money supply. This indicates a high multiplier effect. On the other hand, a high reserve requirement leads to a low multiplier effect. See also: M1, M2. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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