The Money Multiplier is a measurement of the maximum amount of commercial bank money that can be created in a fractional-reserve banking system.
Money Multiplier = 1 / Real Rate of Return
If the real rate of return is 3.25% (0r 0.0325 as a decimal)
Money Multiplier = 1 / 0.0325 = 30.769
- Wikipedia – Money Multiplier – n introduction to the concept of the Money Multiplier.
- Franny Chan – Macroeconomics – Banks and Money Creation – An explanation of the money multiplier and reserve requirement functions.
- ACDC Leadership (YouTube) – How Banks Create Money and the Money Multiplier- Macro 4.8 & Macro 4.11- Money Multiplier & Reserve Requirement (AP Macro) – A pair of videos on the money multiplier and reserve requirement.
- Xplaind – Money Multiplier – An overview of the money multiplier. Includes formulas.
- Economics Help – Money Multiplier and Reserve Ratio – An overview of the money multiplier, including charts and formulas.