First page Back Continue Last page Overview Graphics
Let’s Look at An Example
In the following simple example, we have a small economy with five people (Larry, Curly, Moe, Shemp, and Monty Burns). There are also three businesses (GrouchoCorp, The Harpo Store, and ChicoMart).
Initially there is no bank, but soon Monty Burns (the really rich guy) decides to start his own fractional reserve bank called Acme Bank
Each of the following slides will illustrate the effects of a single transaction in the economy. Be sure to pay close attention to how M1 changes and what the excess reserves of the bank are. These numbers are at the bottom of each slide. The amounts that change as a result of the transaction are shown in red on each slide.