The money-creation multiplier is affected by the

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The money-creation multiplier is affected by both the public's demand for currency as a proportion of demand deposits and the bank reserve-holding ratio as a proportion of demand deposits. When the public holds more currency, the deposits in banks decrease, reducing the amount of potential loans that banks can make. Similarly, if banks increase their reserve-holding ratio, they will have less money available to loan out, reducing the money-creation multiplier. The rediscount rate applied to loans from the Fed to banks may also influence the amount of money created but is not directly related to the money-creation multiplier.

The Money-Creation Multiplier Is Affected by the