In this lesson, our instructor Jibin Park gives an introduction on banking and money creation. He discusses what banks do, assets and liabilities of Park's Place Bank, the problem of bank runs, bank regulation, money creation process, money multiplier formula, and real world money multiplier.
Banks are financial intermediaries that use liquid assets to finance illiquid investments of borrowers
The Federal Reserve imposes restrictions on the amount of money banks can lend out through the Required Reserve Ratio, currently at 10%
The Federal Deposit Insurance Corporation (FDIC) insures deposits of up to $250,000 for customers
Banks “create” money by lending out money from its “reserves.”
The money multiplier formula is the Initial deposit X (1/RRR)
The Monetary Base = Currency in Circulation + Bank Reserves
The Money Supply = Currency in Circulation + Checkable Bank Deposits
Banking & Money Creation
Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.
This book created a 5-step plan to help you study more effectively, use your preparation time wisely, and get your best score. This book includes two full-length practice exams modeled on the real test, all the terms and concepts you need to know to get your best score, and your choice of three customized study schedules.
This book includes an in-depth preparation for both AP economics exams. It features two full-length practice tests, one in Microeconomics and one in Macroeconomics, and all test questions answered and explained. It also features a detailed review of all test topics, which include: supply and demand, theory of consumer choice, economics in the public sector, costs, perfect and imperfect competition, monopolies, labor resources, game theory, the national income and gross domestic product, inflation and unemployment, fiscal policy, money and banking, monetary policy, economic growth, international trade and exchange, interest rate determination, and the market for loanable funds.