Money Supply Calculator

What is Money Supply?

Money supply refers to the total amount of monetary assets available in an economy at a specific time. It includes cash, checking deposits, and other liquid instruments that can be readily used for transactions.

How to Use This Calculator

1. Enter the Monetary Base (MB), which is the total amount of base money in the economy (currency in circulation + reserves held by banks).
2. Enter the Reserve Requirement Ratio (rr), which is the percentage of deposits that banks are required to hold in reserve.
3. Click the Calculate button to compute the money supply.
4. Use the Reset button to clear all inputs and start over.

Working Principle

This calculator uses the simple money multiplier model to calculate the money supply:

Money Supply (M) = Monetary Base (MB) / Reserve Requirement Ratio (rr)

For example, if the monetary base is $100 billion and the reserve requirement ratio is 10% (0.10), the money supply would be $1,000 billion ($100 billion / 0.10).

Limitations

This calculator uses a simplified formula. In reality, the money supply is also influenced by other factors such as:

• Cash leakages from the banking system
• Excess reserves held by banks beyond the required amount
• Central bank policies affecting the monetary base

When to Use This Calculator

This calculator is useful for:

• Economists and financial analysts studying monetary policy
• Students learning about monetary economics
• Individuals interested in understanding how banking systems create money