The money multiplier is calculated as (1 ÷ required reserve ratio).

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The money multiplier formula is M = 1 / reserve requirement ratio, where M is the money multiplier. The reserve requirement ratio is the percentage of deposits that banks are required to hold in reserve. Therefore, as the required reserve ratio decreases, the money multiplier increases, meaning that banks have more money to lend out, and the money supply expands.

The Money Multiplier Is Calculated as (1 ÷ Required Reserve