The textbook money multiplier is a simplification: in practice banks lend based on demand and capital, and the U.S. reserve requirement has been 0% since March 2020.
How to use the Money Multiplier Calculator
- Reserve requirement ratio
- Currency-to-deposit ratio
- Excess reserve ratio
- New reserves (deposit)
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the reserve requirement, currency-to-deposit ratio, excess reserves ratio and the change in reserves.
Tips
- Use real (inflation-adjusted) figures to compare across years.
- Check whether data are seasonally adjusted.
- Use the same currency and base year throughout.
- Economic models simplify reality – treat results as illustrations, not forecasts.
Common mistakes to avoid
- Mixing nominal and real values.
- Comparing percentage changes with percentage-point changes.
- Treating correlations as causes.
Inputs explained
| Field | What to enter |
|---|---|
| Reserve requirement ratio | In % |
| Currency-to-deposit ratio | In % |
| Excess reserve ratio | In % |
| New reserves (deposit) | Amount in your currency |
What each result means
- Simple money multiplier = 100÷[Reserve requirement ratio]
- Money multiplier (with currency and excess reserves) = (1 + [Currency-to-deposit ratio]÷100)÷([Reserve requirement ratio]÷100 + [Currency-to-deposit ratio]÷100 + [Excess reserve ratio]÷100)
- Maximum change in money supply = [New reserves (deposit)]×[Money multiplier (with currency and excess reserves)]
Example values
How the main result changes when Reserve requirement ratio changes and everything else stays at the example values above:
| Reserve requirement ratio (%) | Money multiplier (with currency and excess reserves) |
|---|---|
| 5 | 20 |
| 7.5 | 13.33 |
| 10 | 10 |
| 12.5 | 8 |
| 15 | 6.67 |
| 20 | 5 |
Formula
Simple money multiplier = 1 ÷ reserve requirement ratioWith currency: m = (1 + c) ÷ (r + c + e), c = currency ratio, e = excess reserve ratioMaximum change in money supply = multiplier × change in reservesWorked example
Inputs — Reserve requirement ratio: 10 %; Currency-to-deposit ratio: 0 %; Excess reserve ratio: 0 %; New reserves (deposit): $1,000.
Results — Simple money multiplier = 10; Money multiplier (with currency and excess reserves) = 10; Maximum change in money supply = $10,000.00.
Frequently asked questions
What is the money multiplier?
How much the money supply can grow per dollar of reserves.
What is the formula?
1 ÷ reserve requirement in its simplest form.
Is the reserve requirement still used?
The U.S. cut it to 0% in 2020; other countries still use it.
What formula does the Money Multiplier Calculator use?
Simple money multiplier = 1 ÷ reserve requirement ratio.