The money multiplier is equal is to the total money in the economy divided by the original quantity of money.
To increase interest earnings, a bank lends or invests its excess reserves. The money supply grows by more than one dollar for every $1 rise in the monetary base. The money multiplier is the expansion of the money supply.
In macroeconomics, the money multiplier is significant because it controls the money supply, which influences interest rates. Because it affects monetary policy and the stability of the banking industry, it is also significant in the banking industry.
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