problem set 3-2

Econ 3003

Money and BankingMoney and Banking

IN-CLASS/OUT-OF-CLASS ACTIVITY The Money Creation Game

Dr. Fusaro

There is a 10% reserve requirement. Suppose the fed prints $1,000,000 which gets deposited into Bank A. Bank A loans the money which gets deposited into bank B. Bank B loans the money, etc. Fill in the table below.

Bank Deposits Required Reserves Loans

A

B

C

D

E

F

G

H

I

J

K

L

M

O

Total

Now Calculate the Deposits, Reserves, and Loans for the entire banking system (i.e., not just banks A through O, but also P through Z and beyond).

Deposits ___________________________

Reserves ___________________________

Loans ___________________________