Economics Part B

Table of Contents

Loans multiplier (see deposits multiplier previously)

The loans multiplier sets the level of loans which a bank is permitted to provide for each $1 of cash deposited in its safes. If, for example, the loans multiplier is 2 and the bank has $100 million dollars in cash in the safe, the maximum amount of loans the bank is permitted to provide is $200 million.

The loans multiplier is always 1 less the deposits multiplier.