Updated on June 5, 2018 by admin
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The method of fractional-reserve banking has a cumulative effect of money creation by commercial banks, as it expands money supply (cash and demand deposits) beyond what it could in any other case be. Due to the prevalence of fractional reserve banking, the broad money supply of most international locations is a multiple bigger than the amount of base money created by the country’s central bank That a number of (known as the money multiplier ) is determined by the reserve requirement or other monetary ratio requirements imposed by monetary regulators.
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