Transaction One: Open a Bank and Accept Deposits Name your Bank Draw a T-Account Representing Deposits of $2 million Transaction Two: Grant a Loan The Reserve Requirement is 20% Customer A wants to borrow $1 million. Customer B wants to borrow $400,000. Customer C wants to borrow $300,000. Can you fulfill all three loan requests? Draw a T-Account Representing a bank that is fully “loaned up” (reduce the loan amount to Customer C if necessary)
Transaction One: Open a Bank and Accept Deposits
Name your Bank
Draw a T-Account Representing Deposits of $2 million
Transaction Two: Grant a Loan
The Reserve Requirement is 20%
Customer A wants to borrow $1 million. Customer B wants to borrow $400,000. Customer C wants to borrow $300,000. Can you fulfill all three loan requests?
Draw a T-Account Representing a bank that is fully “loaned up” (reduce the loan amount to Customer C if necessary)
Transaction Three: Follow the Money Creation Process
Customer A deposits his loan with his home bank, Bank of Taylor
Draw a T-Account Representing this transaction for Bank of Taylor assuming they already have $1.5 million in deposits and loans in the amount of $700,000
Transaction Four: Calculate the Money Creation Effect
What is the money multiplier rate in this example?
If banks in this economy are always fully loaned up, calculate how much money was created in this economy from the original three loans made by your bank (the amount that represents the bank’s total
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