2 The money multiplier M=mxB,where m cr+1 crtrr ■Ifr<1,then m>1 If monetary base changes by AB, then△M=mx△B m is called the money multiplier. CHAPTER 18 Money Supply and Money Demand slide 15CHAPTER 18 Money Supply and Money Demand slide 15 The money multiplier ▪ If rr < 1, then m > 1 ▪ If monetary base changes by B, then M = m  B ▪ m is called the money multiplier. M m B =  , 1 where cr m cr rr + = + 2