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What is money multiplier ? 

Money multiplier is defined as the ratio of stock of money (MS) to the stock of High Powered Money (H). In other words, it shows the number of times the total deposits have increased from the initial deposits of money.

Algebraically, money multiplier can be presented as:

where,

 MS represents the Stock of Money

 H represents High Powered Money

Mm represents Money Multiplier

Money multiplier can also be presented as

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 a money multiplier is one of various closely related ratios of commercial bank money to central bank money under a fractional-reserve banking system. Most often, it measures the maximum amount of commercial bank money that can be created by a given unit of central bank money. That is, in a fractional-reserve banking system, the total amount of loans that commercial banks are allowed to extend (the commercial bank money that they can legally create) is a multiple of reserves; this multiple is the reciprocal of the reserve ratio, and it is an economic multiplier.

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what mean by cost & reserve?

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Cost : It is money expenditure incurred by the firm on the production of a commodity or service.

Reserve ; It is the money receipt  which a firm receives from the sale of it's products.

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Money multiplier measures the amount of money that the banks are able to create in the form of deposits with every unit of money it keeps as reserves. It is calculated as :

                       Money Multiplier = 1 / LRR 

LRR = Legal Reserve Requirements 

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