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PERFECT COMPETITION AND SHORT-RUN SUPPLY CURVE: A perfectly competitive firm's supply curve is that portion of its' marginal cost curve that lies above the minimum of the average variable cost curve. A perfectly competitive firm maximizes profit by producing the quantity of output that equates price and marginal cost. As such, the firm moves along it's marginal cost curve in response to alternative prices. Because the marginal cost curve is positively sloped due to the law of diminishing marginal returns, the firm's supply curve is also positively sloped.
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Lesson 19: Money Creation | Unit 3: Modern Banking
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Page: 10 of 23
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Topic:
Fractional-Reserve Magic
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Modern banks practice fractional-reserve banking, which is the key to money creation. Note that: - Modern reserves take the form of vault cash and Federal Reserve deposits.
- Both ensure the safety of deposits.
- Banks seek profits by making loans and adding to checkable deposits.
- Checkable deposits add to the money supply.
Money creation:- Banks practice fractional-reserve banking, seek revenue through loans, and keep reserves.
- Banks keep 10% of outstanding deposits in reserves.
- Reserves over those required to are excess reserves.
- If a bank has excess reserves, then it can make loans, increase checkable deposits, and create money.
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CROSS ELASTICITY OF DEMAND The relative response of a change in the demand for one good to a change in the price of another good. More specifically the cross elasticity of demand is percentage change in the demand for one good due to a percentage change in the price of another good. This notion of elasticity captures the other prices demand determinant. Three other notable elasticities are the price elasticity of demand, the price elasticity of supply, and the income elasticity of demand.
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Parker Brothers, the folks who produce the Monopoly board game, prints more Monopoly money each year than real currency printed by the U.S. government.
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"If anything terrifies me, I must try to conquer it. " -- Francis Charles Chichester, yachtsman, aviator
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WFTU
World Federation of Trade Unions
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