Question

By focusing on money multiplier, explain what happened to MS during global financial crisis.

Answer 1

Answer - During the global financial cash , the flown of the economic transaction across the globe is reduced. This leads to the decline in the flow of the money or the money supply. As a view from the aspect of the Money Multiplier , the decrease in the money supply at the initial level leads to the much greater decrease in the money supply because of the effect of the multiplier. This leads to the magnified effect of the financial crisis in the world economy.