How does a banks total money supply increase with MY deposit?

Discussion in 'BDSM and Fetish movies, pictures and drawings' started by MedSminonem, May 18, 2010.

  1. MedSminonem

    MedSminonem New Member

    I'm reading my management textbook and came across a section called "Banks as Creators of Money"

    Here's the example, FROM THE BOOK:

    Suppose a bank is required to have a reserve of 10% of all deposits.

    You deposit $100, Money that is held in reserve by the bank is $10, Money that the bank has to lend is $90.

    Total supply is $190.

    HOW? is the total supply $190 when you only deposited $100 initially?

    Then the question keeps going .....

    Suppose the bank lends that $90 to your friend. Your friend writes a cheque to McDonalds (or whatever) McDonalds' bank now ends up with a $90 deposit. Therefore:

    the Deposit is $90, Money held in reserve is $9 (10%). And money to lend is now $81.

    The total reserve for both situations above is $271... again i dont understand how..

    can someone please explain;u=42;u=9791;u=73395;u=9598;u=10099;u=13777;u=6799;u=7749;u=13232
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