The money multiplier is derived from the legal reserve requirement.

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The money multiplier is the amount by which an initial deposit is multiplied by the banking system through loan creation. It is directly derived from the legal reserve requirement, which is the percentage of deposits that banks are required to hold as reserves. As banks lend out excess reserves, the money supply expands, and the money multiplier is calculated by dividing the total amount of money created by the initial deposit.

The Money Multiplier Is Derived from the Legal Reserve Requirement