Table :

TABLE 14-1 How Banks Create Money

 

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