The M2 + Money Multiplier Appendix 16 The M2 + Money Multiplier

M2 + = C + D + T +MMF where C = currency D = chequable deposits T = all time and savings deposits MMF = money market mutual funds

t = T / D time and savings deposit ratio let c = C / D currency ratio t = T / D time and savings deposit ratio f = MMF / D money market fund ratio

therefore M2 + = (c x D) + D + (t x D) + (f x D) = D (1 + c + d + f ) recall that equation #2 in the chapter D = ( 1 / (c +r) ) x MB

M2 + = ( (1 + c + d + f )/ (c + rD) ) x MB Therefore M2 + = ( (1 + c + d + f )/ (c + rD) ) x MB where rD is the reserve ratio on (chequable) demand deposits