Money creation in a fractional reserve system | Financial sector | AP Macroeconomics | Khan Academy

AP Macroeconomics on Khan Academy: Welcome to Economics! In this lesson we'll define Economic and introduce some of the fundamental tools and perspectives economists use to understand the world around us!

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[yasharthtrivedi]

You people are great. Quality content with simple explanation. Keep it up guys.👍

[magnumresearch]

I've always been the Reading writing comprehension and spelling girl I've been horrible math all my life! This was simple and I am in awe! Thank you for this I appreciate you brother

[alexanderrr]

The money multiplier only exists in textbooks.

In reality, only capital requirements limit credit creation and there is no fixed ratio between reserves and the quantity of credit that becomes deposits.

[kevtron]

In the case of a mortgage loan, I guess the $900 would go to the seller of the home rather than the borrowers checking account, right? Then the seller would deposit into a bank and then the cycle would continue on from there.

[robertocaesar]

One form to look at it is that in creating interest you create value. The value of putting instant capability in the hands of someone. That requieres an amount of effort and investment. Therefore the amplifying factor.
Now, is it a perfect market? No it's not. No person can really compare the rate of interest between banks beyond the rate itself.
It requieres of the government to be regulated.

[jeremydippel]

You should do a video on the money multiplier!

[kofiboakyeamoa]

I have been waiting for long..thanks much

[jusrarsh]

*Basically we living in a system where they print debt notes paper out of thin air, and our debt forever increases. Meanwhile our purchasing power decreases every year. Great scheme.

[HTC]

So what happens when the reserve requirement is $0. Like now..

[claymagic]

Will the Khan Academy website/app have a whole section dedicated to english?

[topform]

Correct. However, people do not utilize the full proceeds of loans to open other checking accounts. Much of the value of the loans are employed such that the returns will generate not only enough money to repay the interest on the loans but also will generate profits.

[hoangkimviet]

This video helps me understand more about money :0

[mjsmcd]

Got a big question Hasnt the fed now eliminated reserve requirements ? How will this effect the system? THANKS

[thePot_]

In reality its not exactly like that and real multiplicator is slightly different.

[Ian-iutl]

And if the banks are to apply a %10 interst rate on nay loans they give out, then that $1000 becomes $20, 000. Please correct me if I'm wrong.

[bearbear]

i know i sound reallly stupid, but I don't really get it. how is new money getting generated becos if I put in $1000 dollars in a bank, how can a bank reservse 10% of my cash if they would have to eventually give me back my 1000??

[shyamp]

Which is the app you are using as board...?

[earthling]

Is reserve requirement = central bank interest? Or the two are different tool?

[tasvirmahmood]

God help me, need to submit assignment today

[sushrutish]

But how much remain after Inflation, NPA defaults, salaries of Bank, expenditure of loan receiving person, maturity gaps