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LOAN: In general, a transaction in which a legal claim is exchanged for money. The legal claim is typically a contract or promissory note stipulating when and how the money will be repaid. The lender gives up the money and receives the legal claim. The borrower gives up the legal claim and receives the money. A loan can be either an asset or a liability, depending on who does the borrowing and who does the lending. To the borrower, a loan is a liability, something that is owed. The borrower must pay off the loan or repurchase the legal claim. However, to the lender, a loan is an asset, something that is owned. In fact, loans represent a significant part of a bank's assets.

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Lesson Contents
Unit 1: A Little Magic
  • Money
  • Banks
  • Money Creation
  • Unit 1 Summary
  • Unit 2: Fred Returns
  • Review
  • Currency
  • Paper Loans
  • Money Creation
  • Unit 2 Summary
  • Unit 3: Modern Banking
  • Fractional-Reserve Magic
  • Injection
  • Another Bank
  • Yet Another Bank
  • Total Creation
  • Unit 3 Summary
  • Unit 4: The Multiplier
  • The Concept
  • Reserve Ratio
  • Money Multiplier
  • Unit 4 Summary
  • Unit 5: Policy
  • Control
  • Unit 5 Summary
  • Course Home
    Money Creation

    The magic of money creation as practiced by private banks is the topic of this lesson. While it seems like magic, money creation is a fundamental aspect of fractional-reserve banking. As such, in this lesson we take a look at why and how banks create money (a task they would seem to be the exclusive privilege of government). This examination of money creation provides insight into how government is able to control the economy's money supply.

    • The first unit introduces the magic of money creation, as practiced by the banking system.
    • The second unit presents a hypothetical example of money creation as practiced by Fred the Goldsmith, where the money is different, but the process is comparable to modern banks.
    • The third unit of this lesson, then examines a detailed example of how the banking system goes about creating money when it has an injection of excess reserves.
    • In the fourth unit, the money creation process is summarized in terms of a deposit multiplier, which a thought or two on how this can be expanded to a money multiplier, which interests government as it seeks to control the money supply.
    • The last unit of this lesson examines the money creation process in the context of monetary policies and government control of the money supply.

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    COLLUSION PRODUCTION ANALYSIS

    To avoid competition, oligopolistic firms are occasionally inclined to cooperate through collusion. Collusion occurs when two or more oligopolistic firms jointly agree to control market prices and quantity and to generally act like a monopoly. Colluding firms set a price and produce a quantity that maximizes industry-wide economic profit, the same price and quantity that would be selected by a profit-maximizing monopoly. Once the industry-wide price and production are determined, each individual firm produces the quantity of output that equates the marginal cost of the firm to the marginal revenue for the industry.

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    APLS

    GREEN LOGIGUIN
    [What's This?]

    Today, you are likely to spend a great deal of time at the confiscated property police auction looking to buy either a rechargeable battery for your camera or a coffee cup commemorating the first day of spring. Be on the lookout for broken fingernail clippers.
    Your Complete Scope

    This isn't me! What am I?

    A half gallon milk jug holds about $50 in pennies.
    "Argue for your limitations, and sure enough, they're yours."

    -- Richard Bach

    WAPM
    Weak Axiom of Profit Maximization
    A PEDestrian's Guide
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