Deposit Multiplier

Simple Deposit Multiplier

1 _ _R

_D = ———

rD

Deriving the Formula: we assume that banks hold no excess reserves, thus the total amount of required reserves for the banking system RR will equal total reserves in the banking system R:

R = RR = rD _ D

1 _ R

D = ———

rD

1 _ _R

_D = ———

rD

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