Course: Principles of Macroeconomics (ECON 2) · Silver Oak University (fictional sample) · Prof. Ashford
Focus: Money & the Banking System · Objective 7 · SLO A & B

📋 Module Overview Page — "Start Here" (Canvas: Page, published)

Week 9 — Money & the Banking System: How a $1,000 Deposit Becomes $10,000

Welcome back! With the midterm behind you, we turn to a question that sounds almost magical: how does a single deposit at one bank turn into many times that amount of money circulating through the whole economy? The answer isn't magic — it's fractional-reserve banking, and today you'll trace the exact mechanism, round by round, with a model called the money multiplier.

The big question: What is money, and how does an ordinary banking system — just by making loans — end up creating more of it?

By the end of this week, you can:

• state the three functions of money (medium of exchange, store of value, unit of account) and describe, qualitatively, what M1 and M2 each include;
• explain fractional-reserve banking — why a bank only keeps a fraction of deposits on hand and lends out the rest — and trace a T-account through several loan rounds;
• compute the money multiplier (1/RR) and apply it to a new deposit to find the maximum possible expansion of the money supply;
• state the model's built-in caveat: 1/RR is an upper bound, not a guarantee — banks can hold excess reserves, and the modern Fed operates in an ample-reserves environment.

Do this, in order:

1. Read & watch — the Week 9 resources (≈35 min). → Readings & Resources page
2. Lecture Tutorial — work through money, banking & the multiplier with your AI tutor (≈45 min). Due Sun, Nov 1. → submit the chat share link + summary
3. Practice Exercises — 6 quick reps, ungraded (≈15 min).
4. Quiz 9 — 10 questions, closed to AI (≈20 min). Due Sun, Nov 1.
5. Discussion 9 — "Should private banks be able to create money?" Initial post Fri, Oct 30, replies Sun, Nov 1.
6. Assignment 9 — the money-multiplier & bank-lending problem set (100 pts). Due Sun, Nov 1.
7. Workshop 9 — Graph & Model Workshop — "How Banks Create Money": build the deposit-loan rounds in a spreadsheet and compare to 1/RR (50 pts). Due Sun, Nov 1.

A note before you start: the money multiplier is a clean, powerful model — and, like every clean model, it has an honest limit. We'll teach the mechanism carefully AND teach you exactly where it stops being realistic. That combination — know the model, know its limits — is what separates a macro student from a headline. 💪

📣 Welcome Announcement (Canvas: Announcement; available_from_offset_days = 0 — posts Mon, Oct 26)

Subject: Welcome back — let's watch $1,000 become $10,000 👋

Hi everyone, and welcome to Week 9!

Here's the whole week in one sentence: an ordinary bank, just by keeping a fraction of your deposit and lending out the rest, sets off a chain reaction that can expand the money supply far beyond your original deposit. No printing press required — just fractional-reserve banking, one loan at a time.

This week, don't miss:

• The functions of money — medium of exchange, store of value, unit of account — the three jobs any "money" has to do, whether it's dollars, seashells, or cigarettes in a POW camp.
• The T-account chain — a $1,000 deposit at a 10% reserve requirement keeps $100 in the vault and lends out $900; that $900 lands as someone else's deposit, keeps $90 in reserve, lends $810, and the chain keeps going.
• The money multiplier (1/RR) — the shortcut formula that tells you the maximum the money supply could expand, and the honest caveat about excess reserves that keeps this from being a guarantee.

Start with the Module Overview ("Start Here"), then the readings, then your AI Lecture Tutorial. Bring your sharpest question about "so where does the first $1,000 even come from?" to class — it's a great one, and we'll place it in context.

See you in class,
Prof. Ashford