China Cuts Reserve Requirements |
Beijing—China's central bank reduced the amount of reserves commercial banks are required to hold, freeing up money for lending in the latest easing measure to shore up the world's second-largest economy. |
The People's Bank of China's percentage point cut in the reserve requirement lowers the reserve-requirement ratio, or RRR, to 11.5 percent for large banks. The move frees up about US$79 billion in additional funds that banks can now lend. What was the money multiplier in China before the change in reserve requirements? |
A multiplier can be defined as an economic factor that, when changed, result to changes in several other related economic variables. The money multiplier will be computed as 1/r where r means the reserve ratio.
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