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July 21, 2018 

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NET WORTH: The difference between a firm's assets and liabilities, which is the value of a company's assets after deducting liabilities. With assets being what a company owns and liabilities what a company owes, net worth can be thought of as what the company owes to the owners. Net worth is also a measure of wealth.

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Lesson Contents
Unit 1: A Little Magic
  • Money
  • Banks
  • Money Creation
  • Unit 1 Summary
  • Unit 2: Fred Returns
  • Review
  • Currency
  • Paper Loans
  • Money Creation
  • Unit 2 Summary
  • Unit 3: Modern Banking
  • Fractional-Reserve Magic
  • Injection
  • Another Bank
  • Yet Another Bank
  • Total Creation
  • Unit 3 Summary
  • Unit 4: The Multiplier
  • The Concept
  • Reserve Ratio
  • Money Multiplier
  • Unit 4 Summary
  • Unit 5: Policy
  • Control
  • Unit 5 Summary
  • Course Home
    Money Creation

    The magic of money creation as practiced by private banks is the topic of this lesson. While it seems like magic, money creation is a fundamental aspect of fractional-reserve banking. As such, in this lesson we take a look at why and how banks create money (a task they would seem to be the exclusive privilege of government). This examination of money creation provides insight into how government is able to control the economy's money supply.

    • The first unit introduces the magic of money creation, as practiced by the banking system.
    • The second unit presents a hypothetical example of money creation as practiced by Fred the Goldsmith, where the money is different, but the process is comparable to modern banks.
    • The third unit of this lesson, then examines a detailed example of how the banking system goes about creating money when it has an injection of excess reserves.
    • In the fourth unit, the money creation process is summarized in terms of a deposit multiplier, which a thought or two on how this can be expanded to a money multiplier, which interests government as it seeks to control the money supply.
    • The last unit of this lesson examines the money creation process in the context of monetary policies and government control of the money supply.

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    ELASTICITY DETERMINANTS

    Three factors that affect the numerical value of the price elasticity of demand and the price elasticity of supply--availability of substitutes, time period of analysis, and proportion of budget. The price elasticities of demand and/or supply for a good can change if these determinants change. The first two determinants are important to both price elasticity of demand and price elasticity of supply, while the third relates specifically to the price elasticity of demand.

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    Today, you are likely to spend a great deal of time at a going out of business sale looking to buy either a coffee cup commemorating the moon landing or a how-to book on surfing the Internet. Be on the lookout for gnomes hiding in cypress trees.
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    More money is spent on gardening than on any other hobby.
    "When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left, and could say, I used everything you gave me."

    -- Erma Bombeck, writer

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