Hey Everyone! I'm Mr. Willis, and You Will Love Economics!
In this video, I will:
- Define fractional reserve banking
- Explain the process through which demand deposits are turned into required reserves and
new loans (loanable funds)
- Discuss how banks earn profits through interest rates on outstanding loans
- Define the money multiplier
- Explain the process by which "new money" is created through fractional reserve banking
- Practice calculating the change in required reserves, new loans, and the total change in
the money supply produced by changes in monetary policy
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