If credit risk in the banking system increases, all else equal what effect, if at all, will this have on the money multiplier?

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Business

Sylvia Howard

22 September, 20:34

If credit risk in the banking system increases, all else equal what effect, if at all, will this have on the money multiplier?

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Sonny Navarro · Answer 1

Explanation: If the credit risk in the banking system increases, it is normal and even beneficial because if there is credit the economy moves, and obviously it advances since this allows the banks to multiply the money, but if said credit increase, it is given in a way uncontrolled can cause the economy to warm up, leading to financial bubbles.