Question: What Is The Other Name Of Money Multiplier?

What is the relation between LRR and money multiplier?

Ans: Money multiplier = 1/LRR which is equal to 1/0.1=10 Initial deposit Rs.

500 crores Total deposit = Initial deposit x money multiplier = 500 x 10 = 5000 crores.


If total deposits created by commercial banks are Rs..

What is the Keynesian multiplier formula?

The formula for the multiplier: Multiplier = 1 / (1 – MPC)

How do you find the money multiplier?

The money multiplier tells you the maximum amount the money supply could increase based on an increase in reserves within the banking system. The formula for the money multiplier is simply 1/r, where r = the reserve ratio.

Can money multiplier be less than 1?

Problem 5 — Money multiplier. It will be greater than one if the reserve ratio is less than one. Since banks would not be able to make any loans if they kept 100 percent reserves, we can expect that the reserve ratio will be less than one. … The general rule for calculating the money multiplier is 1 / RR.

What are the determinants of money multiplier?

The size of the money multiplier is determined by the currency ratio (Cr) of the public, the required reserve ratio (RRr) at the central bank, and the excess reserve ratio (ERr) of commercial banks. The lower these ratios are, the larger the money multiplier is.

What do you mean by multiplier?

In economics, a multiplier broadly refers to an economic factor that, when increased or changed, causes increases or changes in many other related economic variables. … The term multiplier is usually used in reference to the relationship between government spending and total national income.

What is multiplier example?

multiplier effect. An effect in economics in which an increase in spending produces an increase in national income and consumption greater than the initial amount spent. For example, if a corporation builds a factory, it will employ construction workers and their suppliers as well as those who work in the factory.

What are the types of multiplier?

Here we detail about the top three types of multipliers in economics.(a) Employment Multiplier:(b) Price Multiplier:(c) Consumption Multiplier:

What is meant by money multiplier?

The Money Multiplier refers to how an initial deposit can lead to a bigger final increase in the total money supply. For example, if the commercial banks gain deposits of £1 million and this leads to a final money supply of £10 million. The money multiplier is 10.