Role Played by Commercial Banks Money Creation

Directions

Instead of a discussion board, this week you will submit an individual written assignment that illustrates the role commercial banks play in the creation of money. Assume that, initially, the central bank of an economy puts $5,000 into circulation and commercial banks want to hold reserves of 20 percent of deposits. Further assume that the public holds no currency. Show and discuss the consolidated balance sheets of the economy’s commercial banks for each of the following instances.

After initial deposits (compare to Table 10.2 in your textbook)
After one round of loans (compare to Table 10.3 in your textbook)
After the first redeposit of dollars (compare to Table 10.4 in your textbook)
After two rounds of loans and redeposits (compare to Table 10.5 in your textbook)
What are the final values of bank reserves, loans, deposits, and the money supply (compare to Table 10.6 in your textbook)?

Lecture
“Money”
By Sherry Jensen, PhD

This presentation explores the role of financial intermediaries in the economy
https://mediacdn.bisk.com/AssetService/preview/?mawID=198e5bad-d9bd-42af-9431-ebb86ea1d605&d=0
Supplemental Lecture
“Money Multiplier”
By Sherry Jensen, PhD

Lecture
“Open Market Operations”
By Sherry Jensen, PhD

This presentation details how a central bank can influence an economy’s money supply and how changes in the money supply can impact inflation
https://mediacdn.bisk.com/AssetService/preview/?mawID=1d73daec-c33f-4cf8-afba-5a2bccbe9b08&d=0
Lecture
“Business Cycles”
By Sherry Jensen, PhD

The presentation will identify the four phases of the business cycle and explain the characteristics of recessions and expansions

https://mediacdn.bisk.com/AssetService/Preview/?mawID=6edb5d2d-bfc6-4f44-aebf-fc6b923ba039
Reading
Principles of Macroeconomics, 8th Edition

By Frank, Bernanke, Antonovics, and Heffetz

Chapter 10, “Money, Prices, and the Federal Reserve”
Chapter 12, “Short-Term Economic Fluctuations: An Introduction”