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FAVORABLE BALANCE OF TRADE: An imbalance in a nation's balance of trade in which the payments for merchandise exports received by the country exceed payments for merchandise imports paid by the country. This is also termed a balance of trade surplus. It's considered favorable because more goods are exported out of the country than are imported in, meaning that foreign production is replaced with domestic production, which then increases domestic employment and income. A balance of trade surplus is often the source of a balance of payments surplus.

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Lesson 18: Banking | Unit 3: Reserve Banking Page: 16 of 24

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

Knights make gold deposits, others withdraw gold, merchants seek investment loans, and others repay loans.

Fred must keep sufficient gold to satisfy any withdrawal.

Required reserves:

  • Fred concludes that he needs no more than 10 pounds of gold to back each 100 pounds of gold deposits.
  • He doesn't need to keep 100% of the deposits in reserves.

Fred has discovered modern fractional-reserve banking.

Excess Reserves:

  • Fred uses the other 90% for the loans which earn interest and make his business a profitable one.

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GROSS DOMESTIC PRODUCT, WELFARE

Gross domestic product (GDP) is the total market value of all goods and services produced within the political boundaries of an economy during a given period of time, usually one year. GDP is intended to measure the nation's production of wants-and-needs satisfying goods and services. While it provides an indication of how far the economy has come on the long road to battling the ever-present scarcity problem, it is NOT a direct measure of the nation's welfare or well-being. GDP is certainly a big component of the well-being of the country, but not the ONLY component.

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Today, you are likely to spend a great deal of time searching the newspaper want ads hoping to buy either 500 feet of telephone cable or a package of 4 by 6 index cards, the ones with lines. Be on the lookout for vindictive digital clocks with revenge on their minds.
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In the late 1800s and early 1900s, almost 2 million children were employed as factory workers.
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