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AP Macro Unit 5: T-accounts

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Presentation on theme: "AP Macro Unit 5: T-accounts"— Presentation transcript:

1 AP Macro Unit 5: T-accounts

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

3 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

4 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

5 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

6 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

7 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!

8 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!

9 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!

10 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!

11 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!

12 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!

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