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FINANCIAL WEALTH, AGGREGATE EXPENDITURES DETERMINANT: One of several specific aggregate expenditures determinants assumed constant when the aggregate expenditures line is constructed, and that shifts the aggregate expenditures line when it changes. An increase in financial wealth causes an increase (upward shift) of the aggregate expenditures line. A decrease in financial wealth causes a decrease (downward shift) of the aggregate expenditures line. Other notable aggregate expenditures determinants include consumer confidence, federal deficit, inflationary expectations, and exchange rates.

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Lesson 19: Money Creation | Unit 3: Modern Banking Page: 14 of 23

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The amount of checkable deposits created is a multiple of the amount of excess reserves of the banking system.
  • When banks makes loans, they create deposits, and create money.
When does the process stop?
  • Banks will create $900 of deposits, which added to the original $100 deposit, gives $1,000 of deposits that did not previously exist.
Why?
  • The $100 in reserves added to the first bank are used to back, in total, $1,000 of deposits.
  • If banks keep 10% of deposits in reserve, then every $1 of new reserves can be used to back $10 of new deposits.
  • This is the result of banks practicing fractional-reserve banking.

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KEYNESIAN AGGREGATE SUPPLY CURVE

An aggregate supply curve--a graphical representation of the relation between real production and the price level--that reflects the basic principles of Keynesian economics. The Keynesian aggregate supply curve actually comes in two versions. The basic version is reverse-L shaped, with a horizontal segment connected to a vertical segment at a sharp corner. The modified version is also reverse-L shaped, but the vertical and horizontal segments have positive slopes and connecting corner is rounded. An alternative is the classical aggregate supply curve.

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Today, you are likely to spend a great deal of time strolling around a discount warehouse buying club wanting to buy either a small, foam rubber football or an instructional DVD on learning to the play the oboe. Be on the lookout for jovial bank tellers.
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The first "Black Friday" on record, a friday marked by a major financial catastrophe, occurred on September 24, 1869 -- A FRIDAY -- when an attempted cornering of the gold market induced a financial crises and economy-wide depression.
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