Banking System and Money Supply

The video tutorial explains the balance sheet of First Superior Bank, focusing on assets, liabilities, and equity. It discusses the reserve ratio and how it limits the bank's ability to issue new loans. The impact of new deposits on loan capacity is analyzed, followed by calculations of maximum changes in loans, demand deposits, and money supply. The tutorial concludes with factors that can cause actual changes in money supply to differ from theoretical calculations.

What are the total assets of First Superior Bank as mentioned in the balance sheet?

• $2,200

• $200

• $2,000

• $1,800

What is the required reserve ratio for First Superior Bank?

• 15%

• 5%

• 20%

• 10%

Why can't First Superior Bank make any new loans currently?

• It has already loaned out 90% of its deposits.

• It has excess reserves.

• It has too much equity.

• It has no demand deposits.

After Mr. Smith's deposit, how much can First Superior Bank loan out?

• $110

• $100

• $10

• $90

What is the maximum change in loans over time in the banking system due to Mr. Smith's deposit?

• $810

• $900

• $100

• $1,000

What is the maximum change in demand deposits over time due to Mr. Smith's deposit?

• $100

• $1,000

• $810

• $900

What is the maximum change in the money supply due to Mr. Smith's deposit?

• $900

• $100

• $810

• $1,000

Why might the actual change in money supply be less than the maximum calculated?

• People might deposit more than expected.

• Banks might keep more than the minimum reserves.

• The reserve ratio might decrease.

• Banks might lend more than required.

What happens if banks decide to keep a reserve ratio higher than the required 10%?

• They can loan out more money.

• The money multiplier effect increases.

• The actual change in money supply decreases.

• The reserve ratio becomes irrelevant.

What is one reason people might not deposit all their funds in the banking system?

• Banks have no reserve requirements.

• They prefer to keep cash for emergencies.

• Banks offer high interest rates.

• Deposits are not insured.