Outline the bank multiplier approach to explaining the process of Essay

Outline the bank multiplier approach to explaining the process of money creation and discuss its limitations - Essay Example This has led to call for the replacement of federal reserve system by a computer based system that would fix rates via calculations using standard economic metrics. Say in his law seems to make a suggestion to the fact that money is neutral and does not in any way lead to recession. He felt it was an irrational action to hoard money if one had it. In his view the only reason to have money is to spend it on one’s needs, in buying products. An increased spending is brought about by the increase in money supply going by the opinion that money is meant for spending. Say economist do not believe that businesses suffer as a result of lack of money for which reason other economist may advocate the printing of more money. Say and his followers rather believe that to increase ones purchasing power all that is needed is for there to be an increase in production processes. This would cause demand for the product an exchange for these goods automatically puts money into the pockets of the producer thereby increasing his purchasing power. The printing of more money would invariably lead to indiscriminate consumption which is believed by say economist as a wealth