Question

Conclusion on money multiplier

Answer 1

The work of multiplier is to measure the maximum amount of money a commercial bank can create.

It is also known as the fractional reserving money system.

Money multiplier generally refers to how the initial deposit can lead to the final amount which is the increment of the total money supplied.

Answer 2

Money Multiplier is also known as monetary multiplier, which represents the optimum extent to which the supply of money is affected by any alteration in the sum of deposits.

It equals proportion of growth or diminution in money supply to the conforming escalation and simultaneous reduction in deposits.

The money multiplier effect rises due to the occurrence of credit formation.