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January 18, 2018 

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LONG-RUN EQUILIBRIUM: The condition that exists for the aggregate market when the product, financial, and resource markets are in equilibrium simultaneously. This condition is made possible by flexible wages and prices and is represented by the intersection of the AD (aggregate demand) curve and the LRAS (long-run aggregate supply) curve.

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Lesson 19: Money Creation | Unit 1: A Little Magic Page: 2 of 23

Topic: Banks <=PAGE BACK | PAGE NEXT=>

The mystical source of magic is fractional-reserve banking.

Remember:

  • Banks control 60% of the M1 money supply.
Fractional-reserve banking activities:
  • First: As financial intermediaries banks pool unspent household income, which is used for business loans for investment in capital.
  • Second: As safekeepers of deposits, they provide 60% of the money that our economy uses for exchanges.
Important:
  • The division between reserves and loans is the source of banking magic.

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TIEBOUT HYPOTHESIS

The notion that people relocate from one political jurisdiction to another in search of a more preferred package of government taxes and spending. Named after economist Charles Tiebout, this hypothesis suggests that people "shop" for compatible government activity in the same way they might shop for a car, a house, or a flavor of ice cream. However, shopping for a preferred government package is influenced by other factors affecting migration.

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APLS

WHITE GULLIBON
[What's This?]

Today, you are likely to spend a great deal of time calling an endless list of 800 numbers trying to buy either storage boxes for your summer clothes or 500 feet of coaxial cable. Be on the lookout for high interest rates.
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This isn't me! What am I?

It's estimated that the U.S. economy has about $20 million of counterfeit currency in circulation, less than 0.001 perecent of the total legal currency.
"Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."

-- Mark Twain

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