Currency in circulation | Checkable bank deposits | Money supply | |
First stage: Silas keeps his cash under his bed. | $1,000 | $0 | $1,000 |
Second stage: Silas deposits cash in First Street Bank, which lends out $900 to Maya, who then pays it to Anne Acme. | 900 | 1,000 | 1,900 |
Third stage: Anne Acme deposits $900 in Second Street Bank, which lends out $810 to another borrower. | 810 | 1,900 | 2,710 |