Unit 3: Macroeconomic Policy

Lesson 15a: Monetary Policy - How Banks Create Money

Key Graphs

 

Balance Sheet of Banks

ASSETS

- cash in the vault
- deposits at the Fed

- loans made to customers
- government securities (bonds) bought by the bank

- other (buildings, computers, land, etc)

 

LIABILITIES and NET WORTH

- demand deposits (checking accounts) of customers
- savings accounts and CDs of customers
- loans borrowed from the Fed or from other banks

- net worth

 

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Lesson 15a