I need a valid answer guys......what exactly is the difference between Money Multiplier and Credit Multiplier? They both have same formulas but google says they're not same yet it says 1/r formulas fo

Raghu · 19 Oct 2025

Money Multiplier and Credit Multiplier are related but not the same. Money Multiplier (MM):- Shows how much money supply (M₁ or M₂) increases for every unit increase in monetary base (H or high-powered money). Formula:- {Money Multiplier} = 1 + c/r + e + c = currency–deposit ratio = required reserve ratio = excess reserve ratio It measures the total money supply created (cash + deposits) from the base money. Credit Multiplier (CM) Shows how much credit (deposits/loans) banks can create from a given primary deposit. Formula (simplified case): {Credit Multiplier} = 1/r So, Every credit multiplier is part of the money multiplier, but money multiplier also includes currency held by the public.