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The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends on the percentage of deposits that banks are required to hold on reserves. In other words, it is money used to create more money and calculated by dividing total bank deposits by the reserve requirement. The multiplier effect depends on the set reserve requirement. So, to calculate the impact of the multiplier effect on the money supply, we start with the amount banks initially take in through deposits and divide by the reserve ratio. If, for example, the reserve requirement is 20%, for every $100 a customer deposits into a bank, $20 must be kept in reserve. However, the remaining $80 can be loaned out to other bank customers. This $80 is then deposited by these customers into another bank, which in turn must also keep 20%, or $16, in reserve but can lend out the remaining $64. This cycle continues - as more people deposit money and more banks continue lending it - until finally the $100 initially deposited creates a total of $500 ($100 / 0.2) in deposits. This creation of deposits is the multiplier effect.
The higher the reserve requirement, the tighter the money supply, which results in a lower multiplier effect for every dollar deposited. The lower the reserve requirement, the larger the money supply, which means more money is being created for every dollar deposited. source:: http://financial-dictonary.thefreedictionary.com
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What is the difference between the multiplier and the accelerator?
the multiplier principle implies that investment increases output whereas the acceleration principle implies that increases in output will themselves induce increases in investment.
In economics what is a multiplier?
When used in economics, the term multiplier refers to a proportion factor that measures how much a variable happens to change in response to a change in another variable. The most common multipliers in economics are money multipliers and fiscal multipliers.
What does q stand for in economics?
the q stands for output
What is a slump in regards to economics?
it is a period of low output and low employment
What is considered an optimal mix of output?
The optimal mix of output is known in economics as the most desirable combination of output attainable with available resources, technology, and social values.
What is the difference between the multiplier and the accelerator?
the multiplier principle implies that investment increases output whereas the acceleration principle implies that increases in output will themselves induce increases in investment.
In economics what is a multiplier?
When used in economics, the term multiplier refers to a proportion factor that measures how much a variable happens to change in response to a change in another variable. The most common multipliers in economics are money multipliers and fiscal multipliers.
What are the practical differences between simple multiplier and super multiplier?
The simple multiplier implies that investment is the central determinant of output. The super multiplier combines the multiplier with the accelerator that indicates that investment is not autonomous, but is part of derived demand. Hence, the super multiplier indicates that capacity adjusted output is determined by autonomous demand. Autonomous demand in the case of the super multiplier would correspond to government spending, exports and some elements of consumption (particularly the wealthy whose consumption is not constrained by income). The practical difference is that not only demand determines output in the short run, but also in the long run. The economic system is effectively demand driven and Keynes' Principle of Effective Demand substitutes Say's Law.
What does q stand for in economics?
the q stands for output
What has the author Paramsothy Silvapulle written?
Paramsothy Silvapulle has written: 'Testing stationary nonnested short memory against long memory processes' -- subject(s): Economics, Mathematical, Mathematical Economics, Regression analysis, Statistical hypothesis testing, Time-series analysis 'A Lagrange multiplier test for seasonal fractional integration' -- subject(s): Fractional integrals, Time-series analysis, Multiplier (Economics), Econometrics
What is a slump in regards to economics?
it is a period of low output and low employment
What is considered an optimal mix of output?
The optimal mix of output is known in economics as the most desirable combination of output attainable with available resources, technology, and social values.
What has the author K K Saxena written?
K. K. Saxena has written: 'Steel industry in India and its employment multiplier effects' -- subject(s): Employment (Economic theory), Iron and steel workers, Multiplier (Economics), Steel industry and trade
What is the ct multiplier?
A CT multiplier is the ratio of current trough a CT to the output of a CT. Example: A 200/5 Multiplier means that the cable passing through the CT must see 200A to provide a 5A output to the reading meter. The reading meter will then display 200A on it's display but it of course is only seeing 5A itself. Many digital meters have selectable Multipliers so you don't have to stock a wide selection of meters.
What is Mirco Economics?
Micro economics is a branch of economics. It is a study of individual person, household, firm or industry. It involves determination of prices, quantity demanded and supplied, prices and output, etc.
What is output in economics?
Potential output is the capacity to produce should all factors be employed in an economy. For example, it is the output should there be no unemployment, no spare labour and no spare capital. It is unlikely that actual output will be the same as potential ouput since there is always unemployment.
What has the author Edwin S Mills written?
Edwin S. Mills has written: 'Price, output, and inventory policy' 'Urban economics' -- subject(s): Urban economics 'The economics of environmental quality'
