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SATISFACTION: The process of successfully fulfilling wants and needs. A basic fact of life is that people want and need stuff to stay alive and to make that life more enjoyable. Satisfaction is the economic term that captures this wants-and-needs-fulfilling process. Satisfying wants and needs is actually the ultimate goal of economic activity, the end result of addressing the fundamental problem of scarcity, and, when you get right down to it, life itself.

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Lesson 18: Banking | Unit 3: Reserve Banking Page: 15 of 24

Topic: Goldsmith Loans <=PAGE BACK | PAGE NEXT=>

The story continues when Elizabeth the Innkeeper needs to expand her business and ask Fred for a loan.

The story:

  • Elizabeth's business is booming, but she is temporarily short of money, short of gold.
  • She asks Fred for a loan of gold that belongs to Bill the Knight that Fred keeps on his safe.
  • Elizabeth is willing to pay Fred a sizable fee for taking the risk of making this loan.
  • Fred makes the loan.
  • Elizabeth expands her inn, she repays the loan on schedule with interest with profit from business.
  • Bill collects his gold upon returning.
  • Other local merchants soon seek interest lending services from Fred.

Fred has discovered the lending function of modern banks.


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MERGER

The consolidation of two or more separately-owned businesses under single ownership. Mergers fall into one of three classes--(1) horizontal between firms that sell competing products in the same market, (2) vertical between firms in different stages of the production of one good, and (3) conglomerate between firms that are in separate industries. Because horizontal mergers tend to reduce competition, they are most likely to be scrutinized by government. Mergers are one of several behavioral inclinations of oligopoly. A related oligopolistic behavior is collusion.

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APLS

PINK FADFLY
[What's This?]

Today, you are likely to spend a great deal of time strolling through a department store looking to buy either a brown leather attache case or car battery jumper cables. Be on the lookout for door-to-door salesmen.
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This isn't me! What am I?

The 1909 Lincoln penny was the first U.S. coin with the likeness of a U.S. President.
"The greatest barrier to success is the fear of failure."

-- Sven Goran Eriksson, writer

DARA
Decreasing Absolute Risk Aversion
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