Question

What is the formula for the money multiplier?

Short answer

The formula is $\frac{1}{R}$(Required Reserve ratio). The change in the amount of deposits in which money supply affects to a maximum extent represents the money multiplier.

Step-by-step solution

Concept Introduction

The reserves in the banking system and the plutocrat force relationship are nominated as plutocrat multipliers.$\frac{1}{R}$is the formula for plutocrat multiplier. R stands for the reserve rate.

The formula for money multiplier.

The quantum of plutocrat that a bank generates with its reserves is nominated as a plutocrat multiplier. Reserve is an quantum of deposit that a bank holds. The reserves are increased when banks are entered deposits. The formula is $\frac{1}{R}$( Needed Reserve rate). The change in the quantum of deposits in which plutocrat force affects to a maximum extent represents the plutocrat multiplier.