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- [Instructor] Lets say, for some reason, you had lent the government $1,000, and so the government has given you a formally issued piece of paper that says, Hey, we, the government, owe you $1,000. This is issued by the Treasury. This could be a Treasury bond. It could be a T-Bill of some kind. And lets say that the Federal Reserve, the central bank is interested in inserting money into our system. So lets say this is the Federal Reserve right over here. Federal Reserve. And so what they do is they create $1,000 of Federal Reserve Notes, what we associate as paper money, and they pay it to you and they buy the Treasury, so the Treasury goes to the Federal Reserve from you. And so, in an exchange, you get this newly created money that the Federal Reserve just created. So, there you go. You have, this is $1,000. Now, what would you likely do with that $1,000? Well, it might not be safe to walk around town with your pockets bulging like that, so a lot of folks would deposit it into
