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FACTOR DEMAND DETERMINANTS: The three most important determinants that shift the factor demand curve are: (1) product price, (2) factor productivity, and (3) prices of other factors. Like any determinant, these three cause the factor demand curve to shift to a new location. An increase in factor demand is a rightward shift of the factor demand curve and a decrease in factor demand is a leftward shift.

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Lesson 19: Money Creation | Unit 3: Modern Banking Page: 15 of 23

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  • That modern banks practice fractional-reserve banking, which is the key to money creation.
  • That any reserves over those required to meet a given percentage are called excess reserves, which are used by banks to make loans, increase checkable deposits, and create money.
  • That when a bank receives a deposit, two things happen: the bank adds to vault cash, or reserves, and it adds to its liabilities, the customer's account.
  • That when a check is cleared reserves are transferred from one bank to another.
  • That when banks makes loans, they create deposits, and create money.
  • That the amount of checkable deposits created is a multiple of the amount of excess reserves obtained by the banking system.

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ABSTRACTION

Simplifying the complexities of the real world by ignoring (hopefully) unimportant details while doing economic analysis. Abstraction is an essential feature of the scientific method. Hypothesis verification, model construction, and comparative static analysis are not possible without abstraction.

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Today, you are likely to spend a great deal of time looking for a downtown retail store seeking to buy either a three-hole paper punch or decorative picture frames. Be on the lookout for pencil sharpeners with an attitude.
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The first paper currency used in North America was pasteboard playing cards "temporarily" authorized as money by the colonial governor of French Canada, awaiting "real money" from France.
"Do what you feel in your heart to be right for you'll be criticized anyway. You'll be damned if you do and damned if you don't. "

-- Eleanor Roosevelt, first lady

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