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Sagot :
If the reserve requirement of a bank is 50%, then the multiplier effect will be 2 and $100 in M1 will increase the money supply by $200.
Money in circulation, including cash, coins, and account balances, is collectively referred to as the "money supply." A collection of secure assets that individuals, businesses, and governments can use to make payments or hold as short-term investments is generally referred to as the money supply. Many indicators of the money supply, for instance, include the value of U.S. currency as well as the balances in checking and savings account. The monetary base, M1, and M2 are three examples of common metrics of the money supply.
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