what causes the multiplier effect 
some multiplier effects are simply the product of metric analysis as one number is compared to another in other cases the multiplier effect is a product of public policy or corporate governance for example the government may establish boundaries on how many times a deposit may be cycled through an economy these regulations are often in place to restrict the multiplier effect otherwise financial institutions may become encumbered with too much risk the bottom linemultiplier effects describe how small changes in financial resources such as the money supply or bank deposits can be amplified through modern economic processes sometimes to great effect john maynard keynes was among the first to describe how governments can use multipliers to stimulate economic growth through spending in fractional reserve banking the money multiplier or deposit multiplier effect shows how banks can re lend a portion of the deposits on hand to increase the amount of money in the economy in this way commercial banks have a large degree of influence on economic outcomes 