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if a financial crisis develops in ruritania, with numerous loans going into default, is the money multiplier likely to increase or decrease? decrease increase which example does not represent a leakage from the money multiplier process? cash held by foreigners cash held by individuals excess reserves cash held by the fed

Respuesta :

When a financial extremity develops in Ruritania, with multitudinous loans going into dereliction, the money multiplier is likely to decrease.

       Banks decide to keep some redundant reserves on hand and some loan donors choose to hold some cash rather than deposit all of it in banks. Money Creation bank loans or invests its redundant reserves to earn further interest. A one-bone increase in the financial base causes the plutocrat force to increase by further than one bone.

        The increase in the plutocrat force is the money multiplier. therefore expansionary financial policy( i.e., an increase in the plutocrat force) will beget a drop in average interest rates in frugality. In discrepancy, contractionary financial policy( a drop in the plutocrat force) will beget an increase in average interest rates in frugality.

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