ECON 1000 Study Guide - Money Supply, United States Military Ration, Excess Reserves

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Ardeshir Noordeh

Document Summary

Since chartered banks deposits are considered to be money. It is possible for the banking systems to create money. The banking system can create deposits through loan and thus create money. Assume you deposit in a demand deposit at a chartered bank. Also assume that the bank keeps a 10% of the deposit, or , as a reserve against the deposit. That means that the bank has that it can loan out. When the is taken out of the bank in the form of a loan, money has been created. After keeping back for reserves, the bank has worth of excess reserves, if the was loaned out, the balance sheet would read as follows: It is assumed that the is spent. Assume that the goes toward the purchase of a sofa, the furniture store owner would deposit that in their chartered bank, b.