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January 19, 2019 

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ALLOCATIVE EFFICIENCY: Obtaining the most consumer satisfaction from available resources. Allocative efficiency means that our economy is doing the best job possible of satisfying unlimited wants and needs with limited resources -- that is, of addressing the problem of scarcity.

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Lesson 19: Money Creation | Unit 1: A Little Magic Page: 3 of 23

Topic: Money Creation <=PAGE BACK | PAGE NEXT=>

The magic is that banks create something of value: they create money.

Note that:

  • To create other valuable items we need valuable resources.
  • Banks create money by adding to a checking account.
Precedents:
  • Governments have done this for centuries: When they print paper currency, they transform items with little or no value into money with more value, value that is created from nothing.
The reality of money creation:
  • Banks do part of the money 'printing' or creation function historically performed by governments.
  • This is the reason why banks are heavily regulated.

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INTERCEPT, GOVERNMENT PURCHASES LINE

The intercept of the government purchases line indicates autonomous government purchases, government purchases that do not depend on the level of income or production. This can be thought of as government purchases that the government sector undertakes regardless of the state of the economy. Autonomous government purchases are affected by the government purchases determinants, which cause a change in the intercept and a shift of the government purchases line.

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Today, you are likely to spend a great deal of time at the confiscated property police auction seeking to buy either clothing for your pet iguana or a set of hubcaps. Be on the lookout for telephone calls from long-lost relatives.
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General Electric is the only stock from the original 1896 Dow Jones Industrial Average remaining in the current index.
"You are never given a dream without also being given the power to make it true."

-- Richard Bach, Author

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