4 good questions and answers about "the meaning of money - what banks do"

What is a bank? And what does it do?
A bank is a financial intermediary
it uses liquid assets on the form of bank deposits to finance the illiquid investments of borrowers.
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Can banks create liquidity (money)? How?
Yes it can,
because it doesn't keep all the funds deposited with it in the form of highly liquid assets , but lends out that money so there is more currency in circulation, in the form of loans and mortgages
this can only happen if there is not bank runs
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What is the tool that we use in determining the money supply? And does that tool do?
  • A T-account
  • it is used to analyze a banks financial position, and summarizes its financial position by showing, in a single table, the business's assets on the left, and liabilities, equity on the right.
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What 2 consequences does running out of cash have?
Banking Panic
Bank Run
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