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DISINTERMEDIATION: A general deterioration in the profitability of a bank because it pays high interest rates on short-term borrowing, but earns relatively low interest rates on long-term lending. This was a big, BIG problem for savings and loans (S&Ls) during the 1970s and ultimately caused many of them to fail in the 1980s. S&Ls were designed (by law) to make long-term (30-year) home loans to consumers, but to get the funds for these loans using standard savings accounts. When inflation and interest rates shot up in the 1970s, S&Ls found it necessary to pay savers higher rates to get the funds. But, they still had a bunch of home loans--with low interest rates--that were 15, 20, or 25 years from being repaid. For several years, S&Ls received 6 percent on many of their loans, but paid out something like 12 percent. This gradually eroded their profitability until many were forced to close their doors.

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Lesson 13: The Firm | Unit 3: Legal Types Page: 18 of 24

Topic: Unit Review <=PAGE BACK | PAGE NEXT=>

In this unit, you should have learned about:
  • The three basic legal types of firms -- proprietorship, partnership, and corporation.
  • The proprietorship type of firm in which the a single person owns the firm, makes the decisions, receives the rewards, and is responsible for the debts.
  • The partnership type of firm in which two or more people own the firm, make the decisions, receive the rewards, and are responsible for the debts.
  • The corporation type pf firm in which ownership can be shared by a large number of people with limited liability for company debts.
  • Three relatively new types of firms that offer small scale control with limited liability, including limited partnership, S corporation, and limited liability company.
  • The importance of limited liability and unlimited liability in each of the firm types.

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LIMITED RESOURCES

A basic condition of nature which means that the quantities of available labor, capital, land and entrepreneurship used for the production of goods and services are finite. It means that the economy has only so many resources that can be used AT ANY GIVEN TIME time to produce goods and services. Limited resources are one half of the fundamental problem of scarcity that has plagued humanity since the beginning of time. The other half of the scarcity problem is unlimited wants and needs.

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BROWN PRAGMATOX
[What's This?]

Today, you are likely to spend a great deal of time searching for rummage sales wanting to buy either a coffee cup commemorating the 2000 Olympics or a birthday gift for your grandmother. Be on the lookout for the last item on a shelf.
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A communal society, a prime component of Karl Marx's communist philosophy, was advocated by the Greek philosophy Plato.
"It is very rare that you meet with obstacles in this world (that) the humblest man has not the faculties to surmount. "

-- Henry David Thoreau, philosopher

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Bayesian VAR (Vector Autoregression)
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