What do you mean by money multiplier?
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(a) Explain what monetary economists mean by multiple expansion and multiple contractions of deposits and derive the simple money multiplier.
(b) Explain what is simple about the multiplier you derived in (a) and derive the M1 multiplier. Explain the exact sense in which it is appropriate to assert that the expression you derived for M1 is a behavioral relationship.
(c) Carefully explain the roles of each of the following in the money supply process.
(i) the Federal Reserve
(ii) the non-bank public
(iii) banks
Explain what we mean by “money”, and taking a “narrow” definition of this measure, how a fractional reserve banking system can take a $1000 of “high-powered” money – like cash – and expand the overall money supply by some multiple of that amount; and why can this “money multiplier” be at times quite unpredictable?
SHORT ANSWER PLEASE
How do you affect the size of the money multiplier ? ?