in lending, part of which are the banks, used terms such as credit, deposit and the money multiplier.For people far from the economy, it is sometimes difficult to find the interpretation of technical terms.Therefore it is worthwhile to consider them in detail to understand the functioning of the banking system and the correct interpretation of these concepts.
If you seek clarification from the Dictionary of Economics, and there you can find an explanation of the concept credit multiplier: it is the proportion of increase in the money supply, which is owned by the bank, through the mechanism of credit.In its early years the bank has a certain amount that is invested in its capital as a deposit.Money supply (ie, capital) and its growth and expansion depends on reserve requirements as a policy save.As a result, each bank receives a deposit can add to their reserves a percentage of the amount received by him.Meanwhile, the rest turned into a surplus reserve is transferred to the loan.The multiplicity of expansion of bank capital is inversely proportional to the existing norm of obligatory reserves.
In turn, the interpretation of the concept of "deposit multiplier" reports Dictionary of Business Terms.In his interpretation it is a positive factor of change of funds in bank deposits, which is the result of repeated use of the same money supply in the market and banking.
And he and the other type of money called multipliers, since both operate on the financial component of the funds.Bank (money) multiplier - is to increase the amount of money supply, which is the result of the Bank's loan and deposit activities.Central Bank regulates the activity of other commercial banks, which are issued special norms of compulsory redundancy.
only the banking system may engage in monetary animation.Separate representative does not have such powers.It is possible to consider a specific example.Credit institutions have the mandatory reserve rate of five per cent.If a customer places a bank deposit amounting one thousand rubles, fifty rubles of them fall to the correspondent account in the Central Bank, and nine hundred and fifty are at the disposal of the bank and issued to them on credit.Of this amount, other credit institution takes five percent of the reserve, and the remaining amount of loans issued.As a result, an increasing number of non-cash funds in the banking system.
This process is called credit.He also bears the name of the credit expansion.There is emission of credit money in the banking system.The credit crunch is carried out when the client withdraws the loan.The money supply does not change.This results in an increase or decrease it.To calculate the ratio, which has a bank, the money multiplier, it is necessary to calculate the ratio between the money supply and base.If you increase the percentage of compulsory redundancy, the reduced opportunities for the banking system to create credit issue, and vice versa.
rate is reduced, if you want to stimulate the economy.This results in an increase in the money supply and lower interest rates on loans.Inverse action is taken if there is a threat of inflation.
in the Russian Federation established by the legislation, only the Central Bank has the right to control the emission of bank money and therefore it is able to narrow or expand the commercial banks issuing their opportunities.The money multiplier is calculated as the ratio of increase of money on deposit at commercial banks during the financial movement of masses from one bank to another.This rate can not reach the maximum value, because of the funds held in the free reserves, is not directed at credit operations.
multiplier, as the movement of the money supply - a continuous process.Expect it can be a factor for the period.
