The money multiplier is equal to

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The money multiplier is equal to 1 ÷ required reserve ratio. This is because the required reserve ratio determines the amount of deposits that banks are required to hold as reserves, while the rest can be lent out. The money multiplier represents the total amount of money that can be created by banks using this lending process. Therefore, a lower required reserve ratio will result in a higher money multiplier, indicating that banks can create more money through lending.

The Money Multiplier Is Equal to