**📅 Date:** ➤ ⌈ [[2025-02-10-Mon〚GLP1 ▪ Fisher Effect & IFE ▪ Money Multiplier 〛]]⌋ **👤 Who**：[[⟴X♆⊡Π␢Π⟴⊡]] **💭 Note:** ➤ ==𝑀𝑜𝑛𝑒𝑦𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 = 1/𝑅𝑒𝑠𝑒𝑟𝑣𝑒𝑅𝑎𝑡𝑖𝑜== #💰/Formula ➤ A higher Money Multiplier means a lower Reserve Requirement Ratio (RRR) - Higher Money Multiplier → More credit expansion → Stimulates economy. - Lower Money Multiplier → Reduces excess liquidity → Controls inflation. ➤ ❣️ Precautionary Money Demand (**预防性货币需**) Directly Related to GDP ➤ ❣️ Speculative demand for money（**投机性货币需求**） is actually positively related to the perceived risk of other assets, not inversely related. ⇩ 🅻🅸🅽🅺🆂 ⇩ **🏷️ Tags**: #💰/Economy-Class **🗂 Menu**: ⌈[[✢ M O C ➣ 02 ⌈F E B - 2 0 2 5⌉ ✢|2025-F E B-MOC]]⌋ ➤ ⌈[[Economic L011 - Monetary and Fiscal Policy 货币政策和财政政策-20240206.pdf]]⌋ ➤ ⌈[[Central Bank （ 2% inflation stability）]]⌋ ➤ ⌈⌋ **📑 PDF**：[[Economic L012 - Money Supply, Quantity Equation Of Exchange， Fisher Effect, Central bank .pdf]] --- ## I. What is the Money Multiplier? - The **Money Multiplier** measures how **initial deposits expand into a larger money supply** through the banking system. - It shows **how much money banks can create** based on central bank reserves. ### 🧮 **Formula:** ==𝑀𝑜𝑛𝑒𝑦𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 = 1/𝑅𝑒𝑠𝑒𝑟𝑣𝑒𝑅𝑎𝑡𝑖𝑜== ![[Money Multiplier Formula.png]] - **Lower RRR → Higher Money Multiplier** (More lending, more money creation). - **Higher RRR → Lower Money Multiplier** (Less lending, slower money growth). --- ## **2️⃣ How Does It Work?** 1. A person deposits **$1,000** in a bank. 2. If **RRR = 10%**, the bank **keeps $100** as reserves and **lends out $900**. 3. The borrower spends **$900**, which gets re-deposited into another bank. 4. The process repeats, creating more money in circulation. 📖 **Example Calculation (RRR = 10%)** Money Multiplier = 1 ➗ 10% = 10 🔹 **$1,000 deposit can generate up to $10,000 in total money supply**. --- ## **3️⃣ Why It Matters?** ✅ **Central banks adjust reserve requirements to control money supply.** ✅ **Higher Money Multiplier → More credit expansion → Stimulates economy.** ✅ **Lower Money Multiplier → Reduces excess liquidity → Controls inflation.** 📌 **In a recession, central banks lower RRR to boost lending.** 📌 **In inflationary periods, they raise RRR to limit credit expansion.** 🚀 **Final Takeaway:** The **Money Multiplier is a key concept in monetary policy**, shaping **credit availability, inflation, and overall economic growth**. 📈🏦 ![[Exercise Money Multiplier .jpeg]]