what is money multipler ? how will you determine its value ?what raitos play an important role in the determination of the value of money multiplier?
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Money multiplier (m) is ratio of total money supply (M) to the stock of high powered money (H) in the economy.
m=M/H
Where m represents money multiplier, M total money supply and H is represent stock of high powered money. Clearly value of the multiplier m is greater than 1 (M>1) because increment in a M exeeds H initially injected by RBI. Money supply in the economy is determined by the size of multiplier (m) and amount of high powered money is (H).
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