00:01
Continuing with our look at the process of the money supply, here we're taking an example in which $1 ,000 was withdrawn from a bank by a depositor.
00:08
We'd like to know what effect this has on reserves, checkable deposits, and monetary base.
00:14
For this example, we're going to assume a 10 % reserve ratio.
00:18
And so taking a look at our reserves first, let's remember that as checkable deposits increase, our reserves also increased by a similar amount or by the same amount.
00:26
And as checkable deposits decrease, reserves will also fall by that amount.
00:32
So here, given that $1 ,000 was drawn from the checkable deposits, we can see that same effect on the reserves.
00:38
So reserves are going to decrease by that $1 ,000.
00:41
Now for checkable deposits, we need to take a look at the function where these checkable deposits are equal to deposits, whatever they are, times this deposit ratio...