Level 2A liquid assets and Multiplier: Difference between pages

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''Bank regulation - liquidity''
An economic concept which states that an injection into the economy will increase the equilibrium level of national income by more than the amount of the injection.


Level 2A liquid assets are those of higher liquidity quality, compared with Level 2B.
The multiplier is defined as 1/(1-MPC), where MPC = Marginal Propensity to Consume.


Hence the higher the MPC, the greater the increase in aggregate income as a result of the injection.


Level 2A liquid assets are subject to smaller haircuts of 15% when included in the computation of total HQLAs, compared with Level 2B, which suffer greater haircuts.


== See also ==
* [[Marginal propensity to consume]]
* [[Marginal propensity to save]]


== See also ==
[[Category:The_business_context]]
* [[Credit Quality Step]]
* [[Haircut]]
* [[High Quality Liquid Assets]]
* [[Level 1 liquid assets]]
* [[Level 2 liquid assets]]
* [[Level 2B liquid assets]]
* [[Liquidity buffer]]

Latest revision as of 01:23, 15 May 2020

An economic concept which states that an injection into the economy will increase the equilibrium level of national income by more than the amount of the injection.

The multiplier is defined as 1/(1-MPC), where MPC = Marginal Propensity to Consume.

Hence the higher the MPC, the greater the increase in aggregate income as a result of the injection.


See also