1. Chapter Money & Banking 14

8. The Money Supply M1 + M2 + retirement accounts and other assets that are difficult to convert to cash Even less liquid M3 M1 + savings accounts Broader measure M2 Currency in circulation and traveler’s checks Transactions money-liquid assets M1 Example Definition Type of Money

9. How Banks Work Banks use your deposited money to make loans

10. Simple Money Multiplier: = Deposit Required Reserve SMM SMM x Excess Reserve = $

11. SMM Example: = $100 20 5 5 x $80 = $400