A commercial bank receives a new deposit of ₦200,000. If the cash reserve ratio is 25%, the credit multiplier for the entire banking system is

The credit multiplier (also called the money multiplier) is calculated as 1 divided by the cash reserve ratio. With a reserve ratio of 25% (or 0.25), the multiplier = 1/0.25 = 4. This means the banking system can expand the initial deposit of ₦200,000 into a total of ₦800,000 in new deposits through successive rounds of lending.