The Credit Multiplier (Deposit Multiplier) in a commercial banking system equals:

ACRR / Total Deposits

B1 / Cash Reserve Ratio (1 / CRR)

C1 - Marginal Propensity to Save

DTotal Loans / Total Capital

Explanation

The credit creation capacity of commercial banks is inversely proportional to the required Cash Reserve Ratio (1/CRR).

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