Federal Reserve

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Storyboard Text

  • sweetie I want to give you this gift of 1000 dollars
  • thanks grandma!
  • Right this way miss.
  • Can I get a Loan?
  • I'm here to deposit $1000 dollars.
  • Receiving the $1,000.
  • you will have $900 in our bank due to the 10% we hold back.
  • Depositing the $1000 into a checking account, she now has a balance of $1000. Checking accounts are included in the M1, the money supply by $1,0000.
  • Thanks for selling me the car so cheap Gary!
  • The Bank will now lend part of the $1,000 that was deposited. The amount that the bank is allowed to lend is determined by the Required Reserve Ratio. This is calculated by a ratio of reserves to deposit, the fraction of deposit that must be kept on reserve.
  • I better go deposit the money I made selling my car.
  • For example, suppose that the RRR is 10%, this means that of your $1,000 demand deposit balance, the bank is allow to led you $900.
  • She used the $900 to buy a used card from Gary.
  • Gary is now going to go deposit the $900 that he made out of selling his used car. His bank keeps 10% of the deposit ( which would be $90) as a required reserve.
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