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It is a byproduct of how money works you can check a sample here: https://www.investopedia.com/terms/m/multipliereffect.asp https://www.investopedia.com/terms/
by pchangr 4y ago
It is a byproduct of how money works you can check a sample here:
https://www.investopedia.com/terms/m/multipliereffect.asp https://www.investopedia.com/terms/m/multipliereffect.asp
Basically, up to 0.9 dollar is lent to customer 1 with 0.10 in reserve who deposits in bank 2 .. who lends up to 0.81 to customer 2.. who deposits in bank….
So you end up with the “same” dollar being reused across the whole monetary system multiple times…
- civilized 4y agoThat makes sense and is what I'm familiar with. I'm wondering if the author's explanation is just bad and I should stop trying to make sense of it.
- FPGAhacker 4y agoThey both are saying the same thing.
- type111 4y agoMakes sense but is completely wrong. A bank can credit customers with any size deposits at any time, though in reality they will only do so with an equal sized debit, and within the confines of regulation.