Question

explain the combined quantity of money all banks in multi-bank banking sustem will be capable of creating, if one bank is capable of creating money

Answer 1

In an economy, only the central bannk has the sole power to mint money.
The commercial banks create money by deposits held by the customers, reserves held by the central bank. The excess demamd deposits are lend out in the form of loans with some interest. This in turn will rise the supply of money in the economy.

For example, if there exists only a single bank in the economy, say The State Bank, then in order to keep the money supply going, it will lend out the excess reserves it has. A bank is required to keep a minimum amount aside as reserves so that it can give it back whenever a person demands its deposits back. Assuming that not everyone will withdraw in the same date, the banks will lend out the extra demand deposits as loans with some interest.

Now, suppose there are multi banks in the economy. Similar to the single bank system, all the banks in the multi banking system will also lend out its excess demand deposit and the money supply will increase. However, this increase in money supply will decrease the aggregate demand because an increase in money supply would also increase the interest rates and therefore discourage lending and investments and also, decrease private consumptions of goods and services as people will save more.
So, in order to curb this, in a multi banking system, the amount of money that can be created in the country can be determined by the money multiplier. Money multiplier can be defined as the number of times the banks generate money in the economy with the reserves it holds with the central bank. The money multiplier formula can be written as-
  

Now, to calculate the quantity of money created by all banks would be the money multiplier times the change in excess reserves.
Total quantity of oney created will be -