If, during a deposit expansion, not all money gets redeposited into the banking system and some leaks out as currency, then the real world multiplier is

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Quizplus · Accepted Answer

The real-world multiplier is smaller than the theoretical multiplier of 1/R_d when currency leakage occurs, as not all of the initial deposit will be redeposited into the banking system to be loaned out again. The real-world multiplier will depend on the amount of currency leakage and the behavior of individuals regarding depositing and withdrawing money from banks.

If, During a Deposit Expansion, Not All Money Gets Redeposited