Money multiplier

Definition:

Under the fractional reserve banking system, a unit of cash injected into the system by a central bank increases as it propagates through the banking system. Thus an increase in the monetary base has a magnified effect on the money supply and the multiplicative effect is represented by the money multiplier.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Extrapolative statistical models

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