AP Macro Unit 5: T-accounts

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Presentation transcript:

AP Macro Unit 5: T-accounts

Creating a Bank w/ $250,000 cash Assets Liabilities + net worth Legal Reserves $0 Excess Reserves $250,000 Capital stock Deposits

Liabilities + net worth Acquiring $240,000 Property Assets Liabilities + net worth Legal Reserves $0 Excess Reserves $10,000 Property $240,000 Capital stock $250,000 Deposits

Accepting $100,000 Deposit 20% reserve requirement Assets Liabilities + net worth Legal Reserves $0 $20,000 Excess Reserves $10,000 $90,000 Property $240,000 Deposits $0 $100,000 Capital stock $250,000

Clearing a $50,000 Check (Part 1) Assets Liabilities + net worth Legal Reserves $20,000 Excess Reserves $90,000 $40,000 Property $240,000 Deposits $100,000 $50,000 Capital stock $250,000

Clearing a $50,000 Check (Part 2) Assets Liabilities + net worth Legal Reserves $20,000 $10,000 Excess Reserves $40,000 $50,000 Property $240,000 Deposits $50,000 Capital stock $250,000 less deposits = less legal reserves; money is moved to excess reserves

Granting a $50,000 Loan (borrower puts money in a checking account) Assets Liabilities + net worth Legal Reserves $10,000 Excess Reserves $50,000 Loans $0 $50,000 Property $240,000 Deposits $50,000 $100,000 Capital stock $250,000 Money has been created!

Repaying a Loan (with $$ from the checking account) Assets Liabilities + net worth Legal Reserves $10,000 Excess Reserves $50,000 Loans $50,000 $0 Property $240,000 Deposits $100,000 $50,000 Capital stock $250,000 Money has been destroyed!

Bank buying securities/bonds from the public Assets Liabilities + net worth Reserves $10,000 Securities (an asset to the bank) $0 $50,000 Property $240,000 Deposits (bond seller has $$ from the sale) Capital stock $250,000 Money has been created!

Liabilities + net worth Bank selling Government securities/bonds to the public Assets Liabilities + net worth Reserves $10,000 Securities $50,000 $0 Property $240,000 Deposits (bond seller spends $$ on the purchase) Capital stock $250,000 Money has been destroyed!

Liabilities + net worth Fed buying securities/bonds from the bank Assets Liabilities + net worth Reserves $10,000 Excess Reserves $0 $50,000 Securities $50,000 $0 Property $240,000 Deposits $0 Capital stock $250,000 Money has been created!

Liabilities + net worth Fed selling Government securities/bonds to the bank Assets Liabilities + net worth Legal Reserves $10,000 Excess Reserves $50,000 $0 Securities $0 $50,000 Property $240,000 Deposits $0 Capital stock $250,000 Money has been destroyed!