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Bank Money (Bank Deposit Money)
Bank money, also known as bank deposit money, is a form of money that exists as deposits in commercial banks. It is created when commercial banks issue loans and serves as a medium of exchange when a bank facilitates payments by debiting a buyer's deposit and crediting a seller's. This process involves the bank transferring a portion of its own liability from one party to another.
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Economics
Economy
Introduction to Macroeconomics Course
Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
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Currency (Physical Money)
Bank Money (Bank Deposit Money)
An individual deposits $500 in physical cash into their checking account at a commercial bank. What is the immediate effect of this single transaction on the total measured money supply?
Analyzing the Composition of an Economy's Money Supply
Describing the Money Supply
In a modern economy, the total measured money supply is equivalent to the total value of all physical banknotes and coins currently in circulation.
Match each component of the modern money supply with its correct description.
An economy has the following financial assets:
- $200 billion in physical banknotes and coins held by the public.
- $800 billion in deposits in commercial bank checking accounts.
- $300 billion in government bonds.
- $50 billion in physical banknotes and coins held in bank vaults.
- $500 billion in corporate stocks.
Based on this information, what is the total measured money supply in this economy?
Comparing Components of the Money Supply
In addition to physical banknotes and coins in circulation, the other primary component of the measured money supply in a modern economy is known as ______, which consists of the total deposits held in commercial banks.
Arrange the following items to correctly represent how the total measured money supply is composed, starting from the most basic physical component.
Analyzing Economic Structures via Money Supply Composition
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Dominance of Bank Money in Modern Economies
Creation of Bank Money through Lending
The Liability Question for Physical Currency
Physical vs. Digital Form of Money: Banknotes vs. Bank Deposits
The Foundational Role of Currency in the Banking System
Bank Money's Function as a Medium of Exchange via Liability Transfer
Settling a Transaction with Bank Money
When a depositor makes an electronic payment to a merchant, and both individuals have accounts at the same commercial bank, what is the most accurate description of the bank's role in this transaction?
From the perspective of a commercial bank, the deposits held by its customers are considered an asset on the bank's balance sheet.
The Nature of Bank Deposit Money
Match each concept related to bank deposit money with its correct description.
When a customer pays for a service using a debit card, the transaction is settled by transferring funds between bank accounts. Which statement best analyzes the fundamental economic action performed by the commercial bank during this process?
A commercial bank issues a new loan to a household. Arrange the following events in the correct sequence to illustrate how this action results in the creation of new bank deposit money.
The Dual Nature of Bank Deposits
Imagine a scenario where a large portion of a commercial bank's customers simultaneously attempt to withdraw their entire account balances in physical cash. From the bank's perspective, what is the most fundamental economic problem this situation reveals about the nature of its deposit accounts?
When a commercial bank facilitates a payment between two of its depositors by debiting one account and crediting another, it is fundamentally transferring its own ____ from the payer to the payee.