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HEDGE FUND: A mutual fund that relies heavily on hedging practices to protect the value of the financial assets. Such a fund specializes in options, futures, and other financial instruments that provide insurance protection against price fluctuations, and thus limits the risk of loss.
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Lesson 19: Money Creation | Unit 2: Fred Returns
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Page: 8 of 23
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The money creation mechanism is a profitable opportunity.- With 10% of his receipts redeemed at any given time Fred can issue up to 1,000 pounds of receipts.
- 100 pounds for the original deposits plus another 900 pounds for loans.
Important points:- Fred has created money: Because his receipts are money, he can create money by making loans.
- The new extra 900 pounds of money is used for investment that promotes economic growth.
A precarious balancing act:- If people redeem more than the 10% of the receipts, Fred is in trouble.
- If so, the receipts become worthless, the money supply shrinks, and the local economy enters a recession.
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INFLEXIBLE PRICES The proposition that some prices adjust slowly in response to market shortages or surpluses. This condition is most important for macroeconomic activity in the short run and short-run aggregate market analysis. In particular, inflexible prices (also termed rigid prices or sticky prices) are a key reason underlying the positive slope of the short-run aggregate supply curve. Prices tend to be the most inflexible in resource markets, especially labor markets, and the least inflexible in financial markets, with product markets falling between the two.
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GRAY SKITTERY
[What's This?]
Today, you are likely to spend a great deal of time at an auction hoping to buy either a T-shirt commemorating next Thursday or a birthday gift for your uncle. Be on the lookout for spoiled cheese hiding under your bed hatching conspiracies against humanity.
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Cyrus McCormick not only invented the reaper for harvesting grain, he also invented the installment payment for selling his reaper.
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"Failure will never overtake me if my determination to succeed is strong enough." -- Og Mandino, Author and Speaker
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