Money Multiplier
The textbook relationship between central-bank reserves and the broader money supply: if banks hold reserves equal to fraction r of deposits, then $1 of new reserves can in principle support up to $1/r of total deposits through chained lending. The model assumes reserves are scarce and binding. In the ample-reserves regime since 2008 -- and especially after required reserves went to zero in 2020 -- the multiplier no longer describes how money is created; capital ratios and credit demand bind instead. The multiplier remains useful as historical context and a textbook stepping-stone, not as a description of current system mechanics.
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Related terms
10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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