The deposit multiplier is given by the formula

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The deposit multiplier is calculated by dividing the change in checkable deposits by the change in reserves. This formula is derived from the fact that banks are required to hold a fraction of their deposits as reserves and can lend out the remaining amount. When these loans become deposits in other banks, they too are subject to the reserve requirement. Thus, the initial increase in reserves leads to a larger increase in deposits through the banking system, and the deposit multiplier captures this effect.

The Deposit Multiplier Is Given by the Formula