Multiplier Effect is a macroeconomic effect and a macroeconomic control method. It refers to the chain of changes in the total economic volume caused by the increase or decrease of a certain variable in economic activities. Degree of reaction. Fiscal policy multipliers study the impact of changes in fiscal revenue and expenditure on the national economy, including fiscal expenditure multipliers, tax multipliers and balanced budget multipliers.

The money multiplier is the quantitative expression of the relationship between base currency and money supply expansion, that is, the multiple that the central bank creates or shrinks one unit of base currency and the money supply increases or decreases.

The calculation formula of the complete monetary (policy) multiplier is: k=(Rc 1)/(Rd Re Rc). Among them, Rd, Re and Rc represent the statutory reserve ratio, excess reserve ratio and cash ratio respectively. The basic calculation formula of the monetary (policy) multiplier is: money supply/base money. The money supply is equal to the sum of currency (that is, cash in circulation) and demand deposits; while the base money is equal to the sum of currency and reserves.

The money and loans provided by banks will generate deposits several times its size through several deposits, loans and other activities, which are commonly known as derived deposits. The size of the money multiplier determines the expansion capacity of the money supply. The size of the money multiplier is determined by the following four factors:

(1) Legal reserve ratio. The statutory reserve ratios for time deposits and demand deposits are directly determined by the central bank. Generally, the higher the statutory reserve ratio, the smaller the money multiplier; conversely, the larger the money multiplier is.

(2) Excess reserve ratio. The ratio of reserves held by commercial banks that exceed statutory reserves to total deposits is called the excess reserve ratio. Obviously, the existence of excess reserves correspondingly reduces the bank's ability to create derivative deposits. Therefore, the relationship between the excess reserve ratio and the money multiplier is also in the opposite direction. The higher the excess reserve ratio, the smaller the money multiplier; vice versa. , the greater the money multiplier.

(3) Cash ratio. Cash ratio refers to the ratio of cash in circulation to demand deposits in commercial banks. The level of cash ratio is positively related to the size of money demand.

(4) The ratio between time deposits and demand deposits. Since the derivation capacity of time deposits is lower than that of demand deposits, central banks in various countries have stipulated different statutory reserve ratios for different types of commercial bank deposits. Generally, the statutory reserve ratio for time deposits is lower than that of demand deposits. In this way, even if the statutory reserve ratio remains unchanged, changes in the ratio between time deposits and demand deposits will cause changes in the actual average statutory deposit reserve ratio, ultimately affecting the size of the money multiplier. Generally speaking, when other factors remain unchanged, as the ratio of time deposits to demand deposits increases, the money multiplier will become larger; conversely, the money multiplier will become smaller.

In addition to the above four factors, there are also two special factors: fiscal deposits and credit plan management.