Explain factors that prevent the money multiplier from working empirically as it does theoretically

      

Explain factors that prevent the money multiplier from working empirically as it does theoretically

  

Answers


william
Some banks may choose to hold excess reserves, leading to a money supply that is less than that predicted by the money multiplier.

Customers may withdraw cash, removing a source of reserves against which banks can create money.

Individuals and businesses may not spend the entire proceeds of their loans, removing the multiplier effect on money creation.
steve williams answered the question on January 23, 2018 at 10:49


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