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Define 'Money Multiplier'. - Economics

Definition

Define 'money multiplier'.

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Solution

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,
MS represents the Stock of Money
 H represents High Powered Money
Mm represents Money Multiplier

Concept: Money Creation by Banking System - Limits to Credit Creation and Money Multiplier
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