Week 9 — Money & the Banking System
Welcome to your Week 9 Start Here page.
Why this matters
A café owner depositing the day's cash and a nursing student choosing a checking account both use the system this week takes apart.
In plain language
This week is about money: what it is, how much of it there is, and where most of it comes from. Money (anything people generally accept as payment) does three everyday jobs for you, and it is not the same thing as being rich. Most of the money you spend is not paper cash at all; it is bank deposits. Banks create new deposits when they make loans, through fractional-reserve banking (banks keep only part of each deposit and lend out the rest). By the end of the week you can trace one deposit through a chain of banks and say how much new money the chain can create at most.
- Already covered: the spending multiplier and the flow-vs-stock habit.
- This week: money, its measures, and how bank lending creates deposits.
- How they connect: the deposit chain has its own multiplier, 1 divided by the reserve ratio.
- Where we're going next: Week 10, The Federal Reserve & Monetary Policy.
Focus
Where does money come from, and how far can one deposit stretch?
By the end of this module, you should be able to:
- [ ] name the three jobs money does
- [ ] split a deposit into reserves kept and a loan
- [ ] compute the money multiplier and its ceiling
- [ ] explain why the multiplier is not a forecast
To-do
Plan your week
- Read Chapter 9 (about 40 minutes), then the lecture and slides.
- Work the lecture tutorial (60–90 minutes) and the practice set (about 20 minutes).
- Do the Model Workshop (about 90 minutes), the discussion, and the assignment.
- Take the quiz.
This week's checkpoint: given a deposit and a reserve ratio, say what the bank keeps, what it lends, and the most the chain can reach.
You've got this
Take it in order, and ask your instructor if a step snags.
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