Determine the current reserve standards of banks and other lending institutions you are studying. You can do this by checking with the Federal Register on the current reserve standards or by contacting your U.S. representative's office. Every lending institution is required to keep a certain amount of its deposits on hand as reserve. The rest can be lent out. Thus, if banks have a 10 percent reserve requirement, they must keep $10 of every $100 deposited on hand as cash reserve and may lend out the remaining $90.
Determine the total amount of cash deposits of the institutions you are surveying. You may get this from investor statements or public documents such as state or federally required filings. You may also ask the banks or credit union boards. They are usually willing to disclose the amount of their deposits.
Divide the total of deposits by the reserve percentage. In our example of a $100 deposit with a 10 percent reserve, the resulting calculation would be $100 divided by 0.10, which equals $1,000. The way the effect works is that each time money is lent out, it is redeposited in an institution, which is subject to the same reserve requirements. This constant recirculation naturally increases the money supply and reflects real wealth created by those deposits. Thus, the multiplier effect shows that, when $90 of the initial $100 deposit is lent out, a total of $1,000 in deposits is created along the entire chain.