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PER UNIT TAX: A tax that is specified as a fixed amount for each unit of a good sold. Federal excise taxes on gasoline and cigarettes fall into this per unit tax category.

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Lesson 19: Money Creation | Unit 3: Modern Banking Page: 13 of 23

Topic: Yet Another Bank <=PAGE BACK | PAGE NEXT=>

  • A purchase is made with a check written on Bob's State Bank, which is deposited in Charley's Credit Union.
  • Charley's Credit Union adds $81 worth of liabilities to the store's account.
  • This liability is balanced with reserves transferred from Bob's Bank.
  • Bob's Bank losses $81 and Charley's Credit Union gains $81 of reserves.
  • Bob's Bank ends up with $9 of reserves and an $81 loan.
  • Charley's Credit Union has $81 in reserves. It keeps 10% ($8.10), giving it $71.90 of excess reserves.
  • Charley's Credit Union makes a $71.90 loan to a customer.
  • This creates $71.90 of money. The three banks have created $242.90 worth of money.

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PERFECT COMPETITION

An ideal market structure characterized by a large number of small firms, identical products sold by all firms, freedom of entry into and exit out of the industry, and perfect knowledge of prices and technology. This is one of four basic market structures. The other three are monopoly, oligopoly, and monopolistic competition. Perfect competition is an idealized market structure that is not observed in the real world. While unrealistic, it does provide an excellent benchmark that can be used to analyze real world market structures. In particular, perfect competition efficiently allocates resources.

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Today, you are likely to spend a great deal of time surfing the Internet trying to buy either a set of luggage without wheels or a how-to book on wine tasting. Be on the lookout for telephone calls from long-lost relatives.
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The portion of aggregate output U.S. citizens pay in taxes (30%) is less than the other six leading industrialized nations -- Britain, Canada, France, Germany, Italy, or Japan.
"The greatest things ever done on Earth have been done little by little. "

-- William Jennings Bryan

FIFO
First In First Out
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