Money Multiplier

A Money Multiplier is an economic multiplier that measures how money supply (endogenous variable) increases in response to a change of the monetary base (exogenous variable).

• AKA: Monetary Multiplier, Money Economic Multiplier.
  • …
• Counter-Example(s):
  • Fiscal Multiplier.
  • Keynesian Multiplier.
• See: Economic Output Growth Value, Growth Rate, Economic Acceleration Principle, Multiplier–Accelerator Model.

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References

2016

• (Wikipedia, 2016) ⇒ http://en.wikipedia.org/wiki/Multiplier_(economics)#Money_multiplier
  • In monetary microeconomics and banking, the money multiplier measures how much the money supply increases in response to a change in the monetary base.

The multiplier may vary across countries, and will also vary depending on what measures of money are considered. For example, consider M2 as a measure of the U.S. money supply, and M0 as a measure of the U.S. monetary base. If a $1 increase in M0 by the Federal Reserve causes M2 to increase by $10, then the money multiplier is 10

• (Wikipedia, 2016) ⇒ http://en.wikipedia.org/wiki/Money_multiplier
  • In monetary economics, a money multiplier is one of various closely related ratios of commercial bank money to central bank money under a fractional-reserve banking system. Most often, it measures an estimate of the maximum amount of commercial bank money that can be created, given a certain amount of central bank money. That is, in a fractional-reserve banking system, the total amount of loans that commercial banks are allowed to extend (the commercial bank money that they can legally create) is equal to an amount which is a multiple of the amount of reserves. This multiple is the reciprocal of the reserve ratio, and it is an economic multiplier.

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