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.

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  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

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