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1. Minimum cash reserve ratio.This certain percentage of money legally require by commercial bank to deposit with central bank,during period of inflation minimum reserve ratio is increased thus reducing money supply.
2. Monetary base,this sum of commercial bank reserves and currency held by the public.money supply varies directly with changes in monetary base and inversely with minimum reserve ratio and the currency. 3. Money multiplier,there is positive relationship with money supply.Increase in size of money multiplier will increase money supply.
4. Interest rate,has positive effect on money multiplier and have on money supply.A rise in interest rate will reduce the minimum reserve ratio which raise money multiplier and hence increases the money supply and vice versa.
kevin otieno adoyo answered the question on October 8, 2018 at 19:15
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