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## The Money Supply Multiplier.

The Money Supply Multiplier. We see that there is a new kind of multiplier operating on reserves. For every additional dollar in reserves provided to the banking system, banks eventually create \$10 of additional deposits or bank money. We described the expenditure...

## Final System Equilibrium

Final System Equilibrium Now let’s sum up all. the money creation: \$1000 + S900 + \$810 + \$729 + . .. ? Table 25-6 shows that the complete effect of the chain of money creation . S IO,OOO. We can get the answer b)’ arithmetic. by common sense, and by...

## Chain Repercussions on Other Banks

Chain Repercussions on Other Banks After the \$900 created by Bank I leaves the bank, it will soon be deposited in another bank, and at that point it starts up a chain of expansion whereby still more’ bank money is created. To see what happens to the \$900,...

## How Deposits Are Created: First Generation Banks

How Deposits Are Created: First Generation Banks Let consider what happens When new reserves are injected into the banking system. Assume that the Federal Reserve buys a ,1000 government bond from Ms. Bond holder, and She deposits the \$1000 in her checking account at...

## THE PROCESS OF DEPOSIT CREATION

THE PROCESS OF DEPOSIT CREATION In our discussion of goldsmith banks, we suggested that banks turn reserves into bank money. There are, in fact,  steps in the process. • The central bank determines the quantity of reserves of the banking system. The detailed process...

## legal Reserve Requirements

legal Reserve Requirements In modem banking bank resents are held either as cash on band or as deposits with the central bank. A prudent banker; concerned only with assuring customers that the bank has enough cash for daily transactions. might choose to keep 5 percent...