Principles of Macroeconomics / Unit 11 MAC 1018 short lesson, about 20 seconds
Why the Real Change Is Smaller
Captions available
The idea
The multiplier gives a ceiling, not a forecast. Three things hold the result below it: banks may keep excess reserves, borrowers may not spend everything, and cash held outside banks stops the chain.
In practice
Banks hold more excess reserves in a recession, when lending is wanted.
Where people slip
Every step assumed loans are made and proceeds redeposited. Neither is guaranteed.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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