To comprehend the entire process of money creation today, why don’t we produce a hypothetical system of banking institutions. We shall give attention to three banking institutions in this operational system: Acme Bank, Bellville Bank, and Clarkston Bank. Assume that most banking institutions have to hold reserves corresponding to 10% of the checkable deposits. The number of reserves banking institutions have to hold is named required reserves. The book requirement is expressed being a needed book ratio; it specifies the ratio of reserves to checkable deposits a bank must keep. Banking institutions may hold reserves more than the level that is required such reserves are known as extra reserves. Extra reserves plus needed reserves total that is equal.