How Do Banks Work?
The two columns always balance, like a scale that stays level after every step.
Video coming soon. The lesson video will appear here once it is published on YouTube.
Check yourself: sample questions
Think about each question, pick what you would answer if you like, then select “Show answer” to see the solution and why. Nothing is graded or sent to us. Example numbers are worked examples, not predictions.
1.Which equation always holds for a bank?
The two columns always balance, like a scale that stays level after every step.
2.Marge deposits 100 in cash. What happens on the two columns?
The cash adds 100 to reserves on the left, and on the right the bank owes Marge 100.
3.Leo borrows 50. What does the bank do?
A loan of 50 on the left and a deposit of 50 on the right; the new deposit is new money.
Full course: 4 more questions for this lesson
The full course unlocks all self-check questions of all 365 lessons, the daily plan, your progress and the printable learning record. Lessons 1 to 7 are completely free.
See the full course Start the free week
Already bought? Open the course on this device
Sources (4)
- Money creation in the modern economy (Quarterly Bulletin 2014 Q1) (Bank of England (McLeay, Radia, Thomas))
- Reserve Requirements (Board of Governors of the Federal Reserve System)
- Eigene Rechnung: synthetische Bankbilanz in vier Schritten (Marge legt ein, Leo bekommt einen Kredit)
- Basel III leverage ratio framework - Executive summary (FSI Summaries)
Related lessons
Education only. Not financial advice.