CHAPTER Pulling Rabbits from Hats: Financial Intermediaries and Money Creation Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-1 Direct and Indirect Finance Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-2 Accounting Tautology Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-3 Accounting Tautology Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-4 Sources and Uses of Bank Funds Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-5 Typical Bank’s Balance Sheet Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-6 The Check-Clearing Process through the Central Bank Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-7 Effect of the Cleared Check on the M2 Money Supply Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-8 International Check Clearing Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-9 First National Bank’s Initial Balance Sheet: How Much Can it Lend? Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-27 Lend-Spend-and-Redeposit Cycle Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-28 Checking-Deposit Multiplier: Power of the Banking System to Create Money Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-29 U.S Checking-Deposit Multiplier, 1990–2006 Source: Data from Federal Reserve Bank of St Louis, Economic Data—FRED II, http://research.stlouisfed.org/ fred2/ (accessed September 8, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-30 Effects on the Checking-Deposit Multiplier when 100% of a Loan Is Held as Currency in Circulation Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-31 Effects on the Checking-Deposit Multiplier when 100% of a Loan Is Held as Currency in Circulation Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-32 Effects of Customary Reserves on the Checking-Deposit Multiplier Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-33 Effects on the Checking-Deposit Multiplier of Redeposits in Near-Money Accounts Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-34 Effect of Near-Money Deposits on the Checking-Deposit Multiplier Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-35 Two Ways to Define the M1 Money Supply Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-36 M1, the Monetary Base, and the Checking-Deposit Multiplier Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-37 Two Ways to Define the M2 Money Supply Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-38 M2, the Monetary Base, and the Checking-Deposit-and Near-Money-Deposit Multiplier Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-39 Factors Affecting the M1 and M2 Money Multipliers Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-40 U.S M2 Money Multiplier, 1990–2006 Source: Data from Federal Reserve Bank of St Louis, Economic Data—FRED II, http://research.stlouisfed.org/ fred2/ (accessed September 9, 2006) Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Economic Information for Switzerland, 2001–2005 Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved ... South-Western, a part of Cengage Learning All rights reserved Exhibit 7-14 Changes in First National’s Balance Sheet due to a Cash Loan Copyright© 2008 South-Western, a part of Cengage Learning All rights... Clears from Second National Bank to First National Bank Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-20 Summary of Changes in First National Bank’s Balance... Direct and Indirect Finance Copyright© 2008 South-Western, a part of Cengage Learning All rights reserved Exhibit 7-2 Accounting Tautology Copyright© 2008 South-Western, a part of Cengage Learning