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Username: PrettyWoman Rating:  Asked to: Dara Madee Date Created: 11 Nov 2017 |
| Category | 28 |
| Tag | Financial |
| Question | What is the 'Multiplier Effect'? |
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Hi PrettyWoman, The multiplier effect is the expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends on the percentage of deposits that banks are required to hold as reserves. In other words, it is the money used to create more money and is calculated by dividing total bank deposits by the reserve requirement. |
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