Question

Define 'money multiplier'.

Answer 1

Money multiplier is defined as the ratio of stock of money (MS) to the stock of High Powered Money (H). In other words, it shows the number of times the total deposits have increased from the initial deposits of money.
Algebraically, money multiplier can be presented as:
`"M"_m = ("M"_"s")/"H"`
where,
M_S represents the Stock of Money
 H represents High Powered Money
M_m represents Money Multiplier