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LIMIT PRICING: The strategic behavior process in which a firm with market control sets its price and output so that there is not enough demand left for another firm to enter the market and earn profits. The firm expands its output causing the price to fall, which discourages potential entrants to this market. This practice is most commonly undertaken by oligopoly firms seeking to expand their market shares and gain greater market control.
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Lesson 18: Banking | Unit 4: Regulating Banks
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Page: 21 of 24
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- That banking is one of the most heavily regulated industries in the economy.
- The main reasons of bank regulations:
- When balance between profit and safety fails, customers lose trust and banks may have to shut down.
- Banks control 60% of the M1 money supply.
- The problems for the economy when banks get carried away seeking profits without having enough deposit-protecting reserves.
- The main institutions which regulate banking activities and their main functions: Federal Reserve System (Fed), Federal Deposit Insurance Corporation (FDIC), and Comptroller of the Currency.
- The ways in which banks are regulated.
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SIMPLE EXPENDITURES MULTIPLIER A measure of the change in aggregate production caused by changes in an autonomous expenditure that shocks the macroeconomy, when consumption is the ONLY induced expenditure. The simple expenditures multiplier is the inverse of one minus the marginal propensity to consume, or more simply the inverse of the marginal propensity to save. A related multiplier is the simple tax multiplier, which measures the change in aggregate production caused by changes in taxes.
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Junk bonds are so called because they have a better than 50% chance of default, carrying a Standard & Poor's rating of CC or lower.
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"You don't have to be a fantastic hero to do certain things - to compete. You can be just an ordinary chap, sufficiently motivated to reach challenging goals." -- Sir Edmund Hillary, Explorer
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M2
M1 plus savings types of near monies, including savings deposits, certificates of deposits, money market deposits, repurchase agreements, and Eurodollars
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