Explain how each limits power of the money-creation process

Reference no: EM13218530

The money-creation process we saw in class, and which is described by the money multiplier formula, is a heoretical maximum or "best case" scenario. In reality, there are two factors which limit the precision of the Fed's control of the money supply and limit the amount of actual money supply expansion that results from an initial customer deposit or central bank creation of reserves. Identify what these two factors are and explain how each limits the power of the money-creation process.

Reference no: EM13218530

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