Question

In a typical ailing economy, the Central Bank employed an expansionary Monetary Policy as a measure to boost economic activities. However, people at large are holding on to money and reluctant to park them into the bank. In addition, the commercial banks are keeping very high excess reserves in view of current unfavourable economic condition.

In your opinion, do you think the Monetary Policy executed can uplift the economy? You may explain based on your understanding about Monetary Base and Money Multiplier.

Answer 1

For money multiplier is is necessary to peole borrow money from banks and park their money into banks as in this situation pepole are alredy holding large amount of money and not depositing it into comertial banks.