Enter the change in reserves and the money multiplier into the calculator to estimate the change in the money supply (Multiplier Method). This calculator can also determine the change in reserves or money multiplier, given the other values are known. You can also compute the money supply level using monetary aggregates (M1 or M2) from components using the other tabs.
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Money Supply Formula
The following formula is used in the simplified money multiplier model to estimate the change in money supply caused by a change in reserves.
\Delta M = \Delta R * m
- Where ΔM is the change in money supply
- ΔR is the change in reserves (often discussed as part of the monetary base)
- m is the money multiplier
To estimate the change in the money supply, multiply the change in reserves by the money multiplier.
Money Supply Definition
Money supply is the total amount of money available in an economy at a given time and is commonly measured using monetary aggregates such as M1 and M2. In a simplified money multiplier framework, a change in bank reserves can be used to estimate a corresponding change in the money supply using a multiplier.
Money Supply Example
How to estimate the change in the money supply?
- First, determine the change in reserves (ΔR).
Find the change in reserves to be applied in the multiplier model.
- Next, determine the money multiplier (m).
Calculate or choose the money multiplier to be applied to the change in reserves.
- Calculate the change in money supply (ΔM).
Using the formula, estimate the change in the money supply.
FAQ
The money supply is a measure of the total stock of money in an economy, including currency and certain types of deposits, depending on the definition used (for example, M1 or M2).
Usually, currency and deposit accounts that can be readily used to make payments are included; broader measures (such as M2) also include additional near-money assets like small-denomination time deposits and retail money market mutual funds.
