Enter the required reserve ratio into the calculator to determine the money multiplier of an economy or country.

Money Multiplier Formula

The following formula is used to calculate a money multiplier. 

MM = 1 / RR
  • Where MM is the money multiplier
  • RR is the required reserve ratio

To calculate the money multiplier, divide 1 by the required reserve ratio.

Money Multiplier Definition

A money multiplier is defined as the rate of credit creation of a federal reserve banking system.

Money Multiplier Example

How to calculate a money multiplier?

  1. First, determine the required reserves.

    Calculate the required reserve ratio.

  2. Next, calculate the money multiplier.

    Calculate the money multiplier using the formula above.

FAQ

What is a money multiplier?

A money multiplier is the rate of credit creation due to the federal reserve banking system that requires a bank to hold a certain amount of deposits in reserve.

What is a required reserve?

The required reserve is the number of deposits a bank is required to hold at any given point.

money multiplier calculator
money multiplier formula