Macro 4.4A - Banking - Bank Balance Sheets Made Easy

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2 жыл бұрын

This video covers Bank Banlace Sheets in topic 4.4 of the AP Macroeconomics Course Exam Description (CED). It explains everything you need to know about bank balance sheets.
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Пікірлер: 48

@jjprs3062 Жыл бұрын

Even now I'm still really grateful for this video. You're amazing!

@ReviewEcon Жыл бұрын

Aw! Thank you! Good luck on your exams!

@ceejay1684 Жыл бұрын

this helps me incredibly. thank you for this

@ReviewEcon Жыл бұрын

You're very welcome! Good luck with your studies!

@aswan366 2 жыл бұрын

Thanks a lot dude ! From Tunisia !

@ReviewEcon 2 жыл бұрын

You're very welcome!! Good luck on your exams!

@glennwatson3313 2 жыл бұрын

The balance sheet is surprisingly difficult for students. This should help.

@ReviewEcon 2 жыл бұрын

I hope so! I am taken back by how hard it is for students. I thinks CPI and GDP deflator calculations are much harder, but this is where they seem to struggle most in my class too!

@ciello___8307 Жыл бұрын

A lot of professors unfortunately dont explain it very well. I believe thats why a lot of students struggle

@ReviewEcon Жыл бұрын

Definitely a possibility. 🤷‍♂️😅

@YUBOYIN-es3lc Ай бұрын

really helpful video，clear ideas and concepts

@ReviewEcon Ай бұрын

Thank you! Good luck on your exams!

@mooons9183 28 күн бұрын

hey jacob, I am getting mixed answers about this. Does the reserve requirement apply to savings deposits as well or is it only checking? Thank you for your videos man!!

@ReviewEcon 28 күн бұрын

I agree, mixed answers. For the purposes of the AP exam (the focus of these videos), it's only demand deposits. The reality is it could be either or both. And in the US, the reserve requirement is 0% for all deposits. I hope that helps!

@mooons9183 27 күн бұрын

@@ReviewEcon THANK YOU SO MUCH! I am taking the exam tomorrow and unfortunately, i just discovered your channel two days ago. LIFE SAVER

@williamdickson5696 Ай бұрын

is there only a reserve requirement on deposits in a checking account ? As you said, there is no required reserve on deposits in a savings account so does the reserve requirement ONLY applies to checkable deposits ?

@ReviewEcon Ай бұрын

Correct. Though recent AP questions only have checkable (demand) deposits on bank balance sheets, so the distinction doesn't seem to matter anymore.

@amyliu7745 Ай бұрын

For the last few examples regarding banks A, B, and C, is actual reserves = total reserves? Will I see the word "actual reserves" on the exam?

@ReviewEcon Ай бұрын

Reserves and Total reserves are the phrases used on released questions.

@amyliu7745 Ай бұрын

Also for the banks example in the end, is the reason why loans were not added to the calculation at the end is because they're not new loans? Like you can't loan them out again? Also, would each bank have a different reserve requirement? And lastly, what is the usual reserve requirement (Rate)? Does it adjust with inflation?

@ReviewEcon Ай бұрын

Those are loans the bank already made, so the money is gone. The bank only has an IOU (promise to pay) from the person who borrowed. All banks in an economy have the same RR set by the central bank. Inflation doesn't come into play with these calculations.

@amyliu7745 Ай бұрын

@@ReviewEcon Thanks! What does RR mean?

@artemis505 Ай бұрын

@@amyliu7745 RR: Reserve Requirement

@ReviewEcon Ай бұрын

Thanks for stepping in! I missed this reply! 😅

@amyliu7745 Ай бұрын

Could you explain why for the second example of (savings withdrawal of $1000), why no money comes out of the required reserves?

@ReviewEcon Ай бұрын

That is because checkable (demand) deposits have a reserve requirement (not savings deposits) while savings deposits do not. That said, the newest AP questions now only have demand (checkable) deposits, and savings accounts are now part of M1. So... you won't likely need to worry about the distinction anymore.

@amyliu7745 Ай бұрын

@@ReviewEcon Got it! So if savings accounts are now part of M1, what calculations are these for? M0 or M2?

@amyliu7745 Ай бұрын

And lastly why is the reserve requirement (%) not taken from the total reserves? Like why does it have to be only from the demand deposits? Also, what are securities and why are they a type of bond? And why are bonds considered assets? Isn't a bond like government loaning from someone? Why do they consider that as an asset?

@ReviewEcon Ай бұрын

Reserves (total reserves) are the funds the bank HAS. Demand deposits are what the back owes (That money may or may not actually be in reserves, the bank may have loaned it out. Already). The reserve requirement is a rule that the bank cannot loan all the funds they have. They must keep some in reserve (a percentage of the checkable deposits). Securities and bonds are synonyms on the AP exam. An asset is anything you own that has significant resale value. Bonds are assets because they are sellable to other investors. These are bonds that the bank has purchased, they are very similar to loans the bank has made to borrowers. You can learn more about bonds in my 4.1 video.

@Ego6817 4 ай бұрын

Bro can you explain what happens to Bank's balance sheet when bank transaction occours from one bank to another by account holder , instead of a withdrawal

@ReviewEcon 4 ай бұрын

That would be a withdrawal for one bank (decrease in demand deposits, required reserves, and excess reserves) and a deposit for the other bank (increase in all of those). There would also be no change in the money supply, loans, or deposits in the banking system as numbers would shift from one back to another. I hope that helps!

@Ego6817 4 ай бұрын

@@ReviewEcon thankyou brother it was bothering me... Appreciate your clarification

@amyliu7745 Ай бұрын

Is reserve requirement the % and required reserves is the amount of money specifically?

@ReviewEcon Ай бұрын

If I understand your question correctly Yes. The reserves requirement is expressed as a percentage. And required reserves is the number of dollars that equal the reserve requirement percentage times checkable (demand) deposits. Good luck on your exams!

@amyliu7745 Ай бұрын

@@ReviewEcon Yep you understood it perfectly. Thanks!

@amyliu7745 Ай бұрын

@@ReviewEcon Is required reserves like money that the gov can’t touch unless it’s an emergency? Why do we have that?

@ReviewEcon Ай бұрын

@amyliu7745 required reserves are the amount of funds (reserves are not technically money - but the deposits are) that cannot be loaned out. It's a percentage of checkable deposits. At the end of each day, banks must have their required reserves. If they are short they have to take out a loan. They can borrow from the central bank (and pay the discount rate) or borrow from other banks (and pay the policy rate/Federal Funds Rate).

@amyliu7745 Ай бұрын

@@ReviewEcon Is the Federal Reserve the same thing as the central bank?

@marquisecuffe4061 Жыл бұрын

Are you sure the reserve requirement is for demand deposits? I just got that wrong on Khan academy

@ReviewEcon Жыл бұрын

That is the assumption in AP's way of doing balance sheets. But a central bank could certainly have required reserves on other deposits.

@memarzani Жыл бұрын

Fr I think this guy has it wrong.

@myplace571 3 ай бұрын

on the ap macro exam when asked to calculate the required reserves, do i only calculate from demand deposists or do i also add savings?@@ReviewEcon

@ReviewEcon 3 ай бұрын

@@myplace571 for the AP exam, required reserves are a percentage of demand deposits. That said, newer questions do not even mention savings (I'm considering redoing this video because of that). All deposits have demand deposits on bank balance sheet questions.

@myplace571 3 ай бұрын

yes okay i only asked because different resources have different answers. but as long as its just demand deposists then im clear@@ReviewEcon