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LEGAL CLAIMS: Ownership of the physical goods, services, and resources that make up the real side of the economy. Legal claims are a key feature of the paper, or financial side of the economy. Transferring legal claims is the primary method of diverting income from household saving to investment and government borrowing. Legal-claim buyers loan income and legal-claim sellers borrower income.
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Lesson 18: Banking | Unit 3: Reserve Banking
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Page: 11 of 24
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Banks divide assets between loan and reserves using fractional-reserve banking:- The profit-pursuing, financial intermediary function of banks dictates that deposits be used for loans.
- The safekeeping, money supply security function dictates that banks keep reserves.
A) 100% reserve banking would imply that: - They could not be financial intermediaries, but only storage buildings. The financial intermediary function performed by banks would have to be performed by something else.
B) 0% reserve banking would imply: - Problems with customers who want their wealth, but can't get it because the bank loaned it out.
- The bank can easily be put out of business when customers spread the word that the bank is out of funds.
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DEADWEIGHT LOSS The decrease in the sum of consumer surplus and producer surplus that results from the imposition of a tax. When a tax drives a wedge between demand price and supply price it disrupts what otherwise would be an efficient market equilibrium. Inefficiency arises because while a portion of the sum of consumer and producer surplus is merely transferred to government, a portion of this sum also disappears. The part that disappears is the deadweight loss and is an indicator of the inefficiency of the tax.
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WHITE GULLIBON
[What's This?]
Today, you are likely to spend a great deal of time strolling around a discount warehouse buying club seeking to buy either a brown leather attache case or car battery jumper cables. Be on the lookout for empty parking spaces that appear to be near the entrance to a store.
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Cyrus McCormick not only invented the reaper for harvesting grain, he also invented the installment payment for selling his reaper.
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"The greatest barrier to success is the fear of failure." -- Sven Goran Eriksson, writer
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AIC
Akaike's Information Criterion
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