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GENERAL AGREEMENT ON TARIFFS AND TRADE: A treaty, signed in 1947 by 23 countries including the United States, that was designed to reduce trade barriers. It now carries the signatures of about 100 countries and over the years has been pretty darn effective in reducing tariffs, eliminating some import quotas, and promoting commerce.

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

Topic: Total Creation <=PAGE BACK | PAGE NEXT=>

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 MODEL

A macroeconomic model based on the principles of Keynesian economics that is used to identify the equilibrium level of, and analyze disruptions to, aggregate production and income. This model identifies equilibrium aggregate production and income as the intersection of the aggregate expenditures line and the 45-degree line. The Keynesian model comes in three basic variations designated by the number of macroeconomic sectors included--two-sector, three-sector, and four sector. The Keynesian model is also commonly presented in the form of injections and leakages in addition to the standard aggregate expenditures format. This model is used to analyze several important topics and issues, including multipliers, business cycles, fiscal policy, and monetary policy.

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Today, you are likely to spend a great deal of time at a garage sale seeking to buy either decorative garden figurines or a wall poster commemorating last Friday (you know why). Be on the lookout for strangers with large satchels of used undergarments.
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Potato chips were invented in 1853 by a irritated chef repeatedly seeking to appease the hard to please Cornelius Vanderbilt who demanded french fried potatoes that were thinner and crisper than normal.
"When you play, play hard; when you work, don't play at all. "

-- Theodore Roosevelt, 26th US president

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