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 VERIFICATION: The hypothesis-testing step of the scientific method. Once an hypothesis is derived from a theory, it must be compared with real world data. This is the verification step. This verification can lead to support or refutation of the hypothesis. Enough support enables a hypothesis to become a principle. Refutation calls into question the theory implying the hypothesis.
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 Lesson 19: Money Creation | Unit 3: Modern Banking Page: 14 of 23

 Topic: Total Creation <=PAGE BACK | PAGE NEXT=>

The amount of checkable deposits created is a multiple of the amount of excess reserves of the banking system.
• When banks makes loans, they create deposits, and create money.
When does the process stop?
• Banks will create \$900 of deposits, which added to the original \$100 deposit, gives \$1,000 of deposits that did not previously exist.
Why?
• The \$100 in reserves added to the first bank are used to back, in total, \$1,000 of deposits.
• If banks keep 10% of deposits in reserve, then every \$1 of new reserves can be used to back \$10 of new deposits.
• This is the result of banks practicing fractional-reserve banking.

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AVERAGE REVENUE PRODUCT CURVE

A curve that graphically illustrates the relation between average revenue product and the quantity of the variable input, holding all other inputs fixed. This curve indicates the per unit revenue at each level of the variable input. The average revenue product curve is one of two related curves often used in the analysis of factor demand. The other, and more important, is marginal revenue product curve.

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 The first "Black Friday" on record, a friday marked by a major financial catastrophe, occurred on September 24, 1869 -- A FRIDAY -- when an attempted cornering of the gold market induced a financial crises and economy-wide depression.
 "Executives who get there and stay suggest solutions when they present the problems. "-- Malcolm Forbes, business executive
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