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September 19, 2021 

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LIMITED LIABILITY: A condition in which owners are not personally held responsible for the debts of by a firm. Corporations are the main form of business in which owners have limited liability. The primary benefit of limited liability is that it makes it possible for a business to accumulate large amounts of productive resources that lets it take advantage of large scale production.

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Lesson 19: Money Creation | Unit 2: Fred Returns Page: 7 of 23

Topic: Paper Loans <=PAGE BACK | PAGE NEXT=>

Elizabeth needs a loan, but she doesn't want gold, she wants receipts, she wants money.Remember that:
  • Fred issues receipts only for deposits.
  • Can he just issue receipts?Two options:
  • One: Fred can loan gold from his safe, which Elizabeth can deposit for receipts.
  • Two: Fred can loan Elizabeth the receipts directly. Note that:
  • With both, Elizabeth ends up with receipts and Fred ends up with the same amount of gold in his safe.
  • With both, receipts are not all backed by gold: The loan increases the number of receipts in circulation.Fractional-reserve banking:
  • If every receipt is redeemed, then Fred is in trouble.
  • But Fred knows that only a fraction of the gold is redeemed at any given time.

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AVERAGE REVENUE AND MARGINAL REVENUE

A mathematical connection between average revenue and marginal revenue stating that the change in the average revenue depends on a comparison between average revenue and marginal revenue. For perfect competition, with no market control, marginal revenue is equal to average revenue, and average revenue does not change. For monopoly and other firms with market control, marginal revenue is less than average revenue, and average revenue falls.

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RED AGGRESSERINE
[What's This?]

Today, you are likely to spend a great deal of time at a flea market trying to buy either a 200-foot blue garden hose or a video camera with stop action features. Be on the lookout for letters from the Internal Revenue Service.
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This isn't me! What am I?

There were no banks in colonial America before the U.S. Revolutionary War. Anyone seeking a loan did so from another individual.
"When you play, play hard; when you work, don't play at all. "

-- Theodore Roosevelt, 26th US president

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