Simple Deposit Multiplier Solution

STEP 0: Pre-Calculation Summary
Formula Used
Simple Deposit Multiplier = 1/Required Reserve Ratio
SDm = 1/rrr
This formula uses 2 Variables
Variables Used
Simple Deposit Multiplier - Simple Deposit Multiplier is a a concept that represents the potential increase in the money supply through the process of fractional reserve banking.
Required Reserve Ratio - Required Reserve Ratio refers to the percentage of deposits that a commercial bank must hold in reserve i.e. that the money cannot be loaned out or invested.
STEP 1: Convert Input(s) to Base Unit
Required Reserve Ratio: 0.9 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
SDm = 1/rrr --> 1/0.9
Evaluating ... ...
SDm = 1.11111111111111
STEP 3: Convert Result to Output's Unit
1.11111111111111 --> No Conversion Required
FINAL ANSWER
1.11111111111111 1.111111 <-- Simple Deposit Multiplier
(Calculation completed in 00.004 seconds)

Credits

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Created by Aashna
IGNOU (IGNOU), India
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Verified by Vishnu K
BMS College of Engineering (BMSCE), Bangalore
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Simple Deposit Multiplier Formula

​LaTeX ​Go
Simple Deposit Multiplier = 1/Required Reserve Ratio
SDm = 1/rrr

What do you mean by Simple Deposit Multiplier ?

Simple Deposit Multiplier refers to the amount of money kept in the reserve account of a bank (as a requirement) to allow for continued functionality. It allows the bank to meet the withdrawal demands of their clients, and to limit the potential risks associated with the depletion of their supplies. As a pivotal part of the banking system, central banks put forth a required reserve. The required reserve is the minimum amount of money to be held by a bank, which can be lent out to the bank’s respective customers. Banks are expected to maintain the required reserve in an account that is held at the central bank. The deposit multiplier, as emphasized before, is the opposite of the required reserve. It is the ratio of a bank’s checkable deposits, and it sets forth the foundation for the money multiplier, but the money multiplier is significantly smaller.

How to Calculate Simple Deposit Multiplier?

Simple Deposit Multiplier calculator uses Simple Deposit Multiplier = 1/Required Reserve Ratio to calculate the Simple Deposit Multiplier, Simple Deposit Multiplier refers to the maximum potential increase in the money supply based on assumption that banks lend out the excess reserves they hold. Simple Deposit Multiplier is denoted by SDm symbol.

How to calculate Simple Deposit Multiplier using this online calculator? To use this online calculator for Simple Deposit Multiplier, enter Required Reserve Ratio (rrr) and hit the calculate button. Here is how the Simple Deposit Multiplier calculation can be explained with given input values -> 1.111111 = 1/0.9.

FAQ

What is Simple Deposit Multiplier?
Simple Deposit Multiplier refers to the maximum potential increase in the money supply based on assumption that banks lend out the excess reserves they hold and is represented as SDm = 1/rrr or Simple Deposit Multiplier = 1/Required Reserve Ratio. Required Reserve Ratio refers to the percentage of deposits that a commercial bank must hold in reserve i.e. that the money cannot be loaned out or invested.
How to calculate Simple Deposit Multiplier?
Simple Deposit Multiplier refers to the maximum potential increase in the money supply based on assumption that banks lend out the excess reserves they hold is calculated using Simple Deposit Multiplier = 1/Required Reserve Ratio. To calculate Simple Deposit Multiplier, you need Required Reserve Ratio (rrr). With our tool, you need to enter the respective value for Required Reserve Ratio and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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