Unit 4 - Summary of Items to Know

• Bank Balance Sheet 
• Assets and liabilities in a T account
• Liabilities 
• DD and owner's equity (stock shares)
• Assets
• RR
• ER
• Bank Property
• Securities 
• Loans
• Assets must Equal Liabilities
• DD = RR + ER
• Money is Created through the Monetary Multiplier
• ER x 1/RR ( Multiplier) = new loans throughout the banking supply
• The Money Supply is affected
• Cash from a citizen becomes a DD, but does NOT change the money supply; the ER from this cash becomes an immediate loan amount
• ER x Multiplier become new loans and DO change the money supply
• The Fed Buying Bonds created new loans and changes the money supply
• If the Fed buys the bonds on the open market, this also becomes a new DD amount 
• If the Fed buys bonds from  accounts already held by a particular bank, then the amount only becomes new Excess Reserves
• Supplemental Note about Bonds
• Finally, bond "process" move opposite to the changes in interest rate. High interest rate move bond prices down and low interest rate push bond prices up.
•  Types of Multiplier Deposit Expansion
• Type 1: calculate the initial change in excess reserves aka the amount a single bank can loan from the initial deposit
• Type 2: calculate the change in loans in the banking system
• Type 3: calculate the change in the money supply 
• Type 4: calculate the change in demand deposits.