4.4 econ

assets

assets: things the bank owns

assets = liabilities

total reserves: money that the bank has

• required reserves (percentage of demand deposits the bank cannot loan out)

• excess reserves: money the bank can loan out

loans: bank has made to its customers, money that is owed to the bank

• if a bank loans out its excess reserves, loans are going to increase and excess reserves are going to decrese

• if the loans are paid back, excess reserves increases and loans decrease

other assets

liabilities

things the bank owes

demand deposits (checkable)

• if someone deposits money in their checkign acc, demand deposits will increase 

savings deposits

other liabilities

money multiplier

how many dollars worth of new loans, depositis, and money can be created from banks’ excess reserves

1/ reserve requirement

money multipler x excess reserves = new money, loans, and deposits

decide if the og amount should be included too

• if you deposit 1000= not a loan so it wont be included in new loans, its not new money because it was already cash which is money before deposited, but it is a new deposit

after all the multiplcation, rr only increase by the amount of the initial deposit

open market operations

when the fed reserve buys or sells bonds on the open market