The money multiplier is much lower today than it was twenty-five years ago because:

Question

Quizplus · Accepted Answer

The money multiplier is determined by the currency-to-deposit ratio, and if this ratio is higher, the money multiplier will be lower. This is because banks have less currency to lend out relative to deposits. Therefore, as the currency-to-deposit ratio has increased in the past twenty-five years, the money multiplier has decreased.

The Money Multiplier Is Much Lower Today Than It Was