How do banks create money?
Explore money’s roles, bank balance sheets, lending rounds and the central bank’s effect on the money supply. Then solve ten questions about reserves, multipliers and bank protections.
One asset can do three jobs
| Action | Money’s job |
|---|---|
| Pay $12 for bread | Medium of exchange |
| Save $12 for later | Store of value |
| Compare 3 loaves at $4 each | Unit of account |
One asset can do three jobs
Which assets count as money?
- Classify every listed asset.
- Find narrow and broad money.
- Find bank reserves and the total excluded from narrow money.
- Explain why moving vault cash into the public’s hands changes which category holds it.
| Asset | Amount ($) | Counts in |
|---|---|---|
| Public cash | 2,400 | … |
| Chequable | 7,600 | … |
| Savings | 3,000 | … |
| Vault cash | 900 | … |
| At central bank | 600 | … |
| Bonds | 5,000 | … |
| Shares | 2,000 | … |
Exam coming up and money creation still feels confusing?
Bring your problem sets. We work through them together until every type feels routine.
Questions, answered.
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