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September 21, 2018 

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FEDERAL HOME LOAN BANK: This was originally the federal government entity responsible for chartering and regulating savings and loan associations. However, it has evolved into a group of 12 privately owned, government regulated banks that promote community develop and home ownership by providing funds to lending agencies (that is, banks) that are used for home mortgage loans.

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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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MARGINAL REVENUE CURVE

A curve that graphically represents the relation between the marginal revenue received by a firm for selling its output and the quantity of output sold. A firm maximizes profit by producing the quantity of output found at the intersection of the marginal revenue curve and marginal cost curve. The marginal revenue curve for a firm with no market control is horizontal. The marginal revenue curve for a firm with market control is negatively sloped and lies below the average revenue curve.

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GRAY SKITTERY
[What's This?]

Today, you are likely to spend a great deal of time wandering around the shopping mall seeking to buy either a case for your designer sunglasses or arch supports for your shoes. Be on the lookout for defective microphones.
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This isn't me! What am I?

Natural gas has no odor. The smell is added artificially so that leaks can be detected.
"Man is born to live, not to prepare for life. "

-- Boris Pasternak, writer

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