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 CONCAVE: A curve that is 'bowed-in' toward the origin, like entering a cave. Technically speaking, the slope of a concave curve decreases from left to right as the X-axis variable increases.
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 Lesson 19: Money Creation | Unit 4: The Multiplier Page: 19 of 23

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• That a multiplier captures the magnified relationship between deposit creation and extra bank reserves.
• That the multiplier can be expressed with an equation: D = mR.
• That the key to the deposit multiplier is required reserves and that the deposit multiplier is the inverse of the reserve ratio.
• Other factors that influence the total amount of money created:
• Banks keep excess reserves.
• Money leaks out checkable deposits into savings deposits.
• Customers keep some deposit-creating loans in cash.
• That the Federal Reserve uses a complex money multiplier in trying to control the amount of money circulating in the economy.

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POLICY LAGS

Time lags that occur between the onset of an economic problem and the full impact of the policy intended to correct the problem. Policy lags come in two broad categories--inside lag (getting the policy activated) and outside lag (the subsequent impact of the policy). The three specific inside lags are recognition lag, decision lag, and implementation lag. The one specific outside lag is termed impact lag. Policy lags can reduce the effectiveness of business-cycle stabilization policies and can even destabilize the economy. Policy lags, especially inside lags, are often different for monetary policy than for fiscal policy.

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