Money multiplier: The maximum amount the money supply can increase for each dollar of excess reserves: 1 / required reserve ratio.
How to apply it: Calculate the money multiplier and multiply it by excess reserves to find the maximum expansion of the money supply.
Course: AP Macroeconomics · Unit: Financial Sector
Practice questions about Money multiplier on AimFive — get rubric-based feedback showing exactly which points you earned.
AP and Advanced Placement are trademarks of College Board. AimFive is not affiliated with or endorsed by College Board.