Money Multiplier= "1\/reserve ratio"
This means that for every "\\$1" increase of deposits leads to a "\\$" ("1\/" reserve ratio) increase in money supply.
The money multiplier can be used to determine the total increase in money supply:
Total Increase in Money supply= Money Multiplier "\\times" Deposit.
Initial deposit = "\\$" 1,000
Reserve ratio=10"\\%"
Money multiplier= 1"\/0" .10=10
Increase in money supply = "\\$" 1000 "\\times" 10="\\$" 10,000.
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