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AFRICAN DEVELOPMENT BANK: A regional multilateral development institution engaged in promoting the economic development and social progress of its member countries in Africa. The Bank, established in 1964, started functioning in 1966 with its Headquarters in Abidjan, Cote d' lvoire. The Bank borrows funds from the international money and capital markets. Its shareholders are the 53 countries in Africa as well as 24 countries in the Americas, Europe, and Asia.

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Lesson 19: Money Creation | Unit 4: The Multiplier Page: 18 of 23

Topic: The Money Multiplier <=PAGE BACK | PAGE NEXT=>

Checkable deposits are only part of the money supply.
  • Looking only at checkable deposits, a $100 deposit gives us $1,000 with a deposit multiplier of 10.
However:
  • Money, in total, doesn’t expand by $1,000.
  • First: Banks might keep a few excess reserves, which limits deposit and money creation.
  • Second: Loans might leak out of checkable deposits and into savings deposits, which limits money creation.
  • Third: Loans might leak out of checkable deposits and into cash, which limits reserves and money creation.
Note:
  • The Federal Reserve uses a complex money multiplier to control the amount of money circulating in the economy.

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PRICE ELASTICITY OF SUPPLY

The relative response of a change in quantity supplied to a change in price. More specifically the price elasticity of supply is the percentage change in quantity supplied due to a percentage change in price. This notion of elasticity captures the supply side of the market. A comparable elasticity on the demand side is the price elasticity of demand. Other notable supply elasticities are income elasticity of demand and cross elasticity of demand.

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Today, you are likely to spend a great deal of time looking for the new strip mall out on the highway hoping to buy either a large, stuffed kitty cat or a cross-cut paper shredder. Be on the lookout for empty parking spaces that appear to be near the entrance to a store.
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During the American Revolution, the price of corn rose 10,000 percent, the price of wheat 14,000 percent, the price of flour 15,000 percent, and the price of beef 33,000 percent.
"Man is born to live, not to prepare for life. "

-- Boris Pasternak, writer

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