Economics (McConnell) AP Edition, 19th Edition

Chapter 32: Money Creation

The content of this chapter may be included on the AP* Macroeconomics exam.

After reading this chapter, you should be able to:

1. Explain the basics of a bank's balance sheet and discuss why the U.S. banking system is called a "fractional reserve" system.
2. Explain the distinction between a bank's actual reserves and its required reserves.
3. Describe how a bank can create money.
4. Describe the multiple expansion of loans and money by the entire banking system.
5. Define the money multiplier, explain how to calculate it, and demonstrate its relevance.

AP Chapter 32 Introduction (11.0K)