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DEMAND ELASTICITY AND TOTAL EXPENDITURE: The notion that price-induced changes in total expenditure for a good (price times quantity) depends on the relative price elasticity of demand. In particular, for relatively elastic demand (1 < E < ∞) changes in price cause total expenditure to change in the opposite direction. An increase in price causes total expenditure to fall and a decrease in price causes total expenditure to rise. For relatively inelastic demand (0 < E < 1) changes in price cause total expenditure to change in the same direction. An increase in price causes total expenditure to rise and a decrease in price causes total expenditure to fall. For unit elastic demand (E =1) price changes do not cause any change in total expenditure. Total expenditure is the same whether price increases or decreases.
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Lesson 18: Banking | Unit 3: Reserve Banking
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Page: 11 of 24
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Banks divide assets between loan and reserves using fractional-reserve banking:- The profit-pursuing, financial intermediary function of banks dictates that deposits be used for loans.
- The safekeeping, money supply security function dictates that banks keep reserves.
A) 100% reserve banking would imply that: - They could not be financial intermediaries, but only storage buildings. The financial intermediary function performed by banks would have to be performed by something else.
B) 0% reserve banking would imply: - Problems with customers who want their wealth, but can't get it because the bank loaned it out.
- The bank can easily be put out of business when customers spread the word that the bank is out of funds.
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SHORTAGE A condition in the market in which the quantity demanded is greater than the quantity supplied at the existing price. Because buyers are unable to buy as much of the good as they want, a shortage generally causes an increase in the market price, which then acts to restore equilibrium. A shortage, which also goes by the terms excess demand and sellers' market, is one of two basic states of disequilibrium for the market. The other is surplus.
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BEIGE MUNDORTLE
[What's This?]
Today, you are likely to spend a great deal of time browsing about a thrift store wanting to buy either a box of multi-colored, plastic paper clips or several orange mixing bowls. Be on the lookout for telephone calls from former employers.
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Paper money used by the Commonwealth of Massachusetts prior to the U.S. Revolutionary War, which was issued against the dictates of Britain, was designed by patriot and silversmith, Paul Revere.
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"There's only one corner of the universe you can be certain of improving and that's your own self. " -- Aldous Huxley, writer
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AS-AD
Aggregate Supply-Aggregate Demand Model
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