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September 19, 2021 

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ABSTRACTION: Simplifying the complexities of the real world by ignoring (hopefully) unimportant details while doing economic analysis. Abstraction is often criticized because it's, well, it's JUST NOT REALISTIC. However, when done correctly (ignoring things that JUST DON'T MATTER), then the pursuit of knowledge is greatly enhanced by abstraction. For example, when travelling cross country along a high-speed interstate highway, a paper road map is a handy tool. It shows towns and cities along the way, the major intersections, rest stop locations, and other important points of interest. However, it ignores unimportant details. It doesn't realistically show the location of every tree, bush, or blade of grass. Why bother? This information won't enhance your road trip.

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Lesson 19: Money Creation | Unit 4: The Multiplier Page: 16 of 23

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A multiplier captures the magnified relationship between an activity and the triggering event.The money creation process:
  • The activity is the deposit creation.
  • The trigger event is extra bank reserves.
The multiplier:
  • In our example, the banking system creates $1,000 of deposits from $100 worth of reserves.
  • The deposit multiplier equals 10: Each $1 of extra reserves triggers 10 times the amount in deposits.
D = mR

D = Number of deposits created.
R = Number of reserves added to the banking system.
m = The value of the multiplier (10 in the example).


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WORLD VIEW

An aspect of a scientific theory that includes fundamental, and unverifiable, axioms, beliefs, and values about how the world works. One example of an unverifiable world view axiom is belief in the existence of a supreme, omnipotent, omniscience being--that is, God. Political philosophies, which are essential to economic theories and policies, are intertwined with alternative world views.

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BROWN PRAGMATOX
[What's This?]

Today, you are likely to spend a great deal of time looking for the new strip mall out on the highway seeking to buy either a T-shirt commemorating next Thursday or a birthday gift for your uncle. Be on the lookout for letters from the Internal Revenue Service.
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This isn't me! What am I?

The New York Stock Exchange was established by a group of investors in New York City in 1817 under a buttonwood tree at the end of a little road named Wall Street.
"When you play, play hard; when you work, don't play at all. "

-- Theodore Roosevelt, 26th US president

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