Money and How Banks Create It · seed 1 · A4, ink-friendly. The answer key prints on its own page for grown-ups.

What money is and how banks multiply it

Civics & Economics · Economics · ages 15-16
Name ______________________   Date ____________

  1. Why do volatile crypto coins fail as money?

    • They wobble as a store of value
    • They are too easy to count
    • They never change price

  2. Which three jobs must money do at once?

    • Shine, ring, and fit in a pocket
    • Medium of exchange, unit of account, store of value
    • Mine, factory, and server work

  3. What is a reserve for?

    • Decorating the bank lobby
    • Paying the electricity bill
    • A buffer for withdrawals that also limits how far lending multiplies

  4. The lent 90 coins land in another bank as a deposit. What happens next?

    • The chain stops forever
    • It keeps 9, lends 81, and the chain rolls on
    • It burns the coins

  5. A bank takes 100 coins with a 10 percent reserve rule. How many coins does it lend first?

    Answer: ______________

  6. Why can a queue of withdrawers sink a bank whose loans are sound?

    • Because most deposits are tied up in loans it cannot recall at once
    • Because the vault is too small
    • Because coins melt in queues

  7. A rumour starts a run on a healthy bank. What calms it?

    • Banning all withdrawals forever
    • Melting the coins down
    • Deposit insurance plus emergency lending from the central bank

  8. Depositors can still spend their money because banks keep every coin locked in a vault.

    Circle one:   True   False

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Answer key

For grown-ups. Fold this page away before handing over the rest.

What money is and how banks multiply it W1-mt_ytmJOgw66I-s1

  1. They wobble as a store of value · Savings must keep, and wild swings break that promise.
  2. Medium of exchange, unit of account, store of value · Miss one job and the candidate fails as money.
  3. A buffer for withdrawals that also limits how far lending multiplies · The kept slice cushions shocks and sets the chain limit.
  4. It keeps 9, lends 81, and the chain rolls on · Each round keeps its slice and relends the rest, shrinking each time.
  5. 90 · It keeps 10 back and lends the other 90 onward.
  6. Because most deposits are tied up in loans it cannot recall at once · Healthy but illiquid: sound loans cannot pay everyone today.
  7. Deposit insurance plus emergency lending from the central bank · Guarantees and backup cash stop panic from killing a sound bank.
  8. False · Most is lent out; spending works because only some withdraw at once.
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