[{"data":1,"prerenderedAt":234},["ShallowReactive",2],{"term:money-multiplier":3},{"term":4,"related":221},{"id":5,"title":6,"body":7,"category":203,"description":204,"extension":205,"faq":206,"meta":207,"navigation":208,"path":209,"related":210,"seo":214,"stem":215,"takeaways":216,"__hash__":220},"terms\u002Fterms\u002Fmoney-multiplier.md","Money Multiplier",{"type":8,"value":9,"toc":197},"minimark",[10,15,19,22,26],[11,12,14],"h2",{"id":13},"understanding-money-multiplier","Understanding Money Multiplier",[16,17,18],"p",{},"When banks lend out part of their deposits, the loans become new deposits elsewhere, expanding the money supply. With a reserve ratio r, the textbook multiplier is 1\u002Fr.",[16,20,21],{},"In practice the relationship is loose: banks lend when they find good borrowers and then obtain reserves, and U.S. reserve requirements have been zero since March 2020.",[11,23,25],{"id":24},"formula","Formula",[27,28,31],"span",{"className":29},[30],"katex-display",[27,32,35,73],{"className":33},[34],"katex",[27,36,39],{"className":37},[38],"katex-mathml",[40,41,44],"math",{"xmlns":42,"display":43},"http:\u002F\u002Fwww.w3.org\u002F1998\u002FMath\u002FMathML","block",[45,46,47,68],"semantics",{},[48,49,50,54,58],"mrow",{},[51,52,53],"mtext",{},"Money multiplier",[55,56,57],"mo",{},"=",[59,60,61,65],"mfrac",{},[62,63,64],"mn",{},"1",[51,66,67],{},"Reserve ratio",[69,70,72],"annotation",{"encoding":71},"application\u002Fx-tex","\\text{Money multiplier} = \\frac{1}{\\text{Reserve ratio}}",[27,74,78,107],{"className":75,"ariaHidden":77},[76],"katex-html","true",[27,79,82,87,95,100,104],{"className":80},[81],"base",[27,83],{"className":84,"style":86},[85],"strut","height:0.8889em;vertical-align:-0.1944em;",[27,88,92],{"className":89},[90,91],"mord","text",[27,93,53],{"className":94},[90],[27,96],{"className":97,"style":99},[98],"mspace","margin-right:0.2778em;",[27,101,57],{"className":102},[103],"mrel",[27,105],{"className":106,"style":99},[98],[27,108,110,114],{"className":109},[81],[27,111],{"className":112,"style":113},[85],"height:2.0074em;vertical-align:-0.686em;",[27,115,117,122,193],{"className":116},[90],[27,118],{"className":119},[120,121],"mopen","nulldelimiter",[27,123,125],{"className":124},[59],[27,126,130,184],{"className":127},[128,129],"vlist-t","vlist-t2",[27,131,134,179],{"className":132},[133],"vlist-r",[27,135,139,156,167],{"className":136,"style":138},[137],"vlist","height:1.3214em;",[27,140,142,147],{"style":141},"top:-2.314em;",[27,143],{"className":144,"style":146},[145],"pstrut","height:3em;",[27,148,150],{"className":149},[90],[27,151,153],{"className":152},[90,91],[27,154,67],{"className":155},[90],[27,157,159,162],{"style":158},"top:-3.23em;",[27,160],{"className":161,"style":146},[145],[27,163],{"className":164,"style":166},[165],"frac-line","border-bottom-width:0.04em;",[27,168,170,173],{"style":169},"top:-3.677em;",[27,171],{"className":172,"style":146},[145],[27,174,176],{"className":175},[90],[27,177,64],{"className":178},[90],[27,180,183],{"className":181},[182],"vlist-s","​",[27,185,187],{"className":186},[133],[27,188,191],{"className":189,"style":190},[137],"height:0.686em;",[27,192],{},[27,194],{"className":195},[196,121],"mclose",{"title":198,"searchDepth":199,"depth":199,"links":200},"",2,[201,202],{"id":13,"depth":199,"text":14},{"id":24,"depth":199,"text":25},"economy","The textbook link between bank reserves and the total money supply.","md",[],{},true,"\u002Fterms\u002Fmoney-multiplier",[211,212,213],"monetary-policy","quantity-theory-of-money","open-market-operations",{"title":6,"description":204},"terms\u002Fmoney-multiplier",[217,218,219],"Textbook multiplier = 1 ÷ reserve ratio.","Bank lending creates deposits.","Real-world money creation depends on loan demand and capital, not a fixed ratio.","jN1CjjtHH3-IsdIsT9M1ttvdvaVC2oCyI7ZKXvQK0EY",[222,226,230],{"title":223,"description":224,"path":225},"Monetary Policy","How a central bank manages interest rates and the money supply to steer the economy.","\u002Fterms\u002Fmonetary-policy",{"title":227,"description":228,"path":229},"Open Market Operations","Central bank purchases and sales of government securities to manage reserves and interest rates.","\u002Fterms\u002Fopen-market-operations",{"title":231,"description":232,"path":233},"Quantity Theory of Money","The idea that money supply times its velocity equals the price level times real output.","\u002Fterms\u002Fquantity-theory-of-money",1793374005455]