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THREE-SECTOR AGGREGATE EXPENDITURES LINE: A graphical depiction of the relation between aggregate expenditures by the three domestic macroeconomic sectors (household, business, and government) and the level of aggregate income or production. The three-sector aggregate expenditures line combines consumption expenditures, investment expenditures, and government purchases. The slope of this aggregate expenditures line is based on the marginal propensity to consume, adjusted for marginal propensities of the other expenditures that are assumed to be induced when constructing the line. This is one of three aggregate expenditures lines based on the number of sectors included. The others are the two-sector aggregate expenditures line and the four-sector aggregate expenditures line.
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Lesson 18: Banking | Unit 3: Reserve Banking
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Page: 12 of 24
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Topic:
Legal, Required, and Excess Reserves
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1. Legal reserves: - Vault cash and deposits with the Federal Reserve that can be used to satisfy the legal reserve requirements and are needed for daily operations.
2. Required reserves: - The vault cash and deposits with the Federal Reserve that they have to keep to back deposits.
3. Excess reserves: - Any reserves over and above required reserves.
- Excess reserves don't add to revenue and profit.
Two uses of excess reserves: - First: banks use them for loans.
- Second: banks use them for investment securities.
Important point: - Controlling excess reserves is key to controlling the nation's money supply.
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INCREASING MARGINAL RETURNS In the short-run production by a firm, an increase in the variable input results in an increase in the marginal product of the variable input. Increasing marginal returns typically surface when the first few quantities of a variable input are added to a fixed input. This is one of two alternatives for marginal returns. The other is decreasing marginal returns. A related phenomenon for long-run production is increasing returns to scale.
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Only 1% of the U.S. population paid income taxes when the income tax was established in 1914.
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"The greatest things ever done on Earth have been done little by little. " -- William Jennings Bryan
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TGE
Tokyo Grain Exchange (Japan)
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