The Money Multiplier

But the money creation isn't over. Remember, we left Second National Bank with some excess reserves. So they can make a new loan and increase their profits -- and the cycle starts over. And the cycle continues, indefinitely, with smaller and smaller amounts of new money creation at each stage, as shown in Table 4.

We see that the upper limit of total new money is six times the original influx of reserves. This is the money multiplier. It is the inverse of the reserve ratio.