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INDEPENDENT VARIABLE: A variable that is identified outside the workings of the model. Also termed an exogenous variable, an independent variable is in essence the "input" of the model. It should be compared with an endogenous variable this is the "output" of the model.

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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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FACTOR PAYMENTS

Payments made to scarce resources, or the factors of production (labor, capital, land, and entrepreneurship), in return for productive services. Factor payments are frequently categorized according to the services of the productive resource being rewarded. Wages are paid for the services of labor; interest is the payment for the services of capital, rent is the services for land, and profit is the factor payment to entrepreneurship.

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BEIGE MUNDORTLE
[What's This?]

Today, you are likely to spend a great deal of time flipping through mail order catalogs looking to buy either a set of serrated steak knives, with durable plastic handles or a pair of blue silicon oven mitts. Be on the lookout for pencil sharpeners with an attitude.
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In his older years, Andrew Carnegie seldom carried money because he was offended by its sight and touch.
"No amount of business school training or work experience can teach what is ultimately a matter of personal character. "

-- Truett Cathy, Chick-fil-A Inc. founder

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