Explain the limitations of the high powered money multiplier

Topic: ‘Explain the limitations of the high powered money multiplier
approach of credit creation. What alternative theories account for these
limitations? To what extent are these theories relevant to the current
context of monetary policy?’
Paper instructions:
• The high-powered money multiplier approach to credit creation is
introduced and the key assumptions are presented and explained;
• The advantages and disadvantages of the high powered money
multiplier approach are presented and accounted for;
• Emphasise the limitations of the high-powered money multiplier
approach.
• Evidence of application could be provided;
• What alternative theories account for the limitations of the high-
powered money multiplier approach?
• Explain the key points of these theories;

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