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MATURITY: That date at which the principal on a bond or similar financial asset needs to be repaid. Maturity dates can be anywhere from a few hours to 30 or more years. For example, government securities are classified by their maturity dates, with Treasury bills maturing in one year or less, Treasury notes in 1 to 10 years, and Treasury bonds in 10 years or more. Under normal (nonrecessionary) conditions, shorter maturity periods carry lower interest rates, while longer maturities need higher interest rates to compensate for the uncertainty of tying funds up for longer periods.

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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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ASSUMPTIONS, KEYNESIAN ECONOMICS

The macroeconomic study of Keynesian economics relies on three key assumptions--rigid prices, effective demand, and savings-investment determinants. First, rigid or inflexible prices prevent some markets from achieving equilibrium in the short run. Second, effective demand means that consumption expenditures are based on actual income, not full employment or equilibrium income. Lastly, important savings and investment determinants include income, expectations, and other influences beyond the interest rate. These three assumptions imply that the economy can achieve a short-run equilibrium at less than full-employment production.

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APLS

PURPLE SMARPHIN
[What's This?]

Today, you are likely to spend a great deal of time lost in your local discount super center looking to buy either a computer that can play music and burn CDs or a T-shirt commemorating last Friday (you know why). Be on the lookout for attractive cable television service repair people.
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A lump of pure gold the size of a matchbox can be flattened into a sheet the size of a tennis court!
"You are never given a dream without also being given the power to make it true."

-- Richard Bach, Author

APT
Arbitrage Pricing Theory
A PEDestrian's Guide
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