1. Banks and the Money Supply
The money multiplier
SECOND NATIONAL BANK
Assets
Liabilities
Reserves
Loans
$9.00
$81.00
Deposits
$90.00
THIRD NATIONAL BANK
Assets
Liabilities
Reserves
Loans
$8.10
$72.90
Deposits
$81.00

2. Banks and the Money Supply
The money multiplier (R=10%)
Original deposit = $100.00
First National lending = $ [= .9 × $100.00]
Second National lending = $ [= .9 × $90.00]
Third National lending = $ [= .9 × $81.00] …
Total money supply = $1,000.00
Money Multiplier = $1000/$100= 10

3. Banks and the Money Supply
The money multiplier (Calculate for R = 20%)
Original deposit = $100.00
First National lending = __________
Second National lending = ________
Third National lending = __________ …
Total money supply = ___________
Money Multiplier = ___________

4. Banks and the Money Supply
The money multiplier (Calculate for R = 5%)
Original deposit = $100.00
First National lending = __________
Second National lending = ________
Third National lending = __________ …
Total money supply = ___________
Money Multiplier = ___________