Money Multiplier
Definition
Ratio of broad money (e.g. M2) to the monetary base. Depends on banks' reserve ratios and the public's currency preferences.
Example
With a 10% reserve ratio and no leakage, the money multiplier approaches 10.
Ratio of broad money (e.g. M2) to the monetary base. Depends on banks' reserve ratios and the public's currency preferences.
With a 10% reserve ratio and no leakage, the money multiplier approaches 10.