Money Multiplier & Reserve Requirement

What is the money multiplier, and how does it affect the total increase of money supply? Mr. Clifford explains the difference in how the money supply changes when the Federal Reserve System purchases bonds versus when an average person deposits money into a bank.

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CCSS: Adaptable
Classroom Considerations

  • Students should have a basic understanding of how banks create money, the responsibility of the Federal Reserve System, the money supply graph, and purchasing bonds before beginning this video
  • This is the fifth video in a series of eight designed to teach AP macroeconomic students about monetary policy
Pros

  • Brief, direct instructional video to explain concept
  • Includes world problems similar to those that might occur on an advanced placement exam
Cons

  • Presenter moves fairly quickly through the content, so be prepared to explain concepts more fully