1 / 7

Unit: Money, Banking and Monetary Policy

Unit: Money, Banking and Monetary Policy. Topic: Banking. Learning Targets. The student will understand how the fractional reserve banking system creates money. Banking. HIGH interest rates – more people will save money; fewer people will borrow money.

lyris
Télécharger la présentation

Unit: Money, Banking and Monetary Policy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Unit: Money, Banking and Monetary Policy Topic: Banking

  2. Learning Targets • The student will understand how the fractional reserve banking system creates money.

  3. Banking • HIGH interest rates – more people will save money; fewer people will borrow money. • LOW interest rates – less people will save money; more people will borrow money

  4. Banking • The U.S. banking system operates under a fractional reserve banking system. • When you put money in a bank, the bank only keeps part of it in the bank (required reserves – set by the Federal Reserve). • The bank can choose to hold extra money in reserves (excess reserves). • The rest of the money is used to make loans to other bank customers. • Money is created through this process.

  5. Practice • The reserve requirement is 10%. Sophia deposits $100 in the bank. How much are required reserves? How much is loaned? • The reserve requirement is 25%. Josh deposits $1000 in the bank. How much are required reserves? How much is loaned?

  6. Banking • Example: • Ava deposits $1000 into her bank. The Fed set the reserve requirement at 10%. • How much does the bank keep in reserves? • $100 • How much does the bank loan out? • $900 • What is the loaned money used for? • Spending on houses, investment, etc. • So…Ava’s $1000 is still available to her, and someone else has $900 to spend…the banking system created money!

  7. Banking • Loans/borrowing occurs when someone needs money. • Businesses need money to INVEST (buy new resources, provide training for workers, build new facilities, etc.). • ↑ loans/borrowing (b/c of lower interest rates) => ↑ investment => ↑ resources => economic growth! • Remember – in order to make loans, a bank needs you to save!

More Related