March 21, 2018 

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WAGES, AGGREGATE SUPPLY DETERMINANT: One of several specific aggregate supply determinants assumed constant when the short-run aggregate supply curve is constructed, and that shifts the short-run aggregate supply curve when it changes. An increase in the wages causes a decrease (leftward shift) of the short-run aggregate supply curve. A decrease in the wages causes an increase (rightward shift) of the short-run aggregate supply curve. Other notable aggregate supply determinants include the technology, energy prices, and the capital stock. Wages are an example of a resource price aggregate supply determinant.

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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.


  • 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.
  • The division between reserves and loans is the source of banking magic.

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Markets, exchanges, and other assorted economic activities that deal with legal or paper claims on physical assets rather than the physical assets. The vast majority of activities for the paper economy take place through financial markets. The paper economy complements production and consumption activities of the real economy that involve product markets and resource markets.

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Today, you are likely to spend a great deal of time looking for a downtown retail store trying to buy either an AC adapter for your CD player or storage boxes for your family photos. Be on the lookout for rusty deck screws.
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