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AE LINE: Another term for aggregate expenditure line, which is a line representing the relation between aggregate expenditures and gross domestic product used in the Keynesian cross. The aggregate expenditure line is obtained by adding investment expenditures, government purchases, and net exports to the consumption line. As such, the slope of the aggregate expenditure line is largely based on the slope of the consumption line (which is the marginal propensity to consume), with adjustments coming from the marginal propensity to invest, the marginal propensity for government purchases, and the marginal propensity to import. The intersection of the aggregate expenditures line and the 45-degree line identifies the equilibrium level of output in the Keynesian cross.
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Lesson 19: Money Creation | Unit 2: Fred Returns
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Page: 9 of 23
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- Reviewing Fred the Goldsmith, that Fred has developed several modern banking functions: safekeeping, depository, lending and fractional-reserve banking functions.
- Fred's system of tracking gold flows by issuing receipts for each deposit.
- The three main features of Fred's system:
- Knights need not withdraw the same gold deposited.
- Fred need not personally know each knight requesting services.
- These gold receipts are as good as gold and become money.
- Two options Fred has to make a loan:
- Loan some gold from the safe which could be deposited back in return for receipts.
- To loan the receipts directly.
- The importance of fractional-reserve banking and Fred's ability to create money that is used for investment and economic growth.
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MARGINAL REVENUE PRODUCT The change in total revenue resulting from a unit change in a variable input, keeping all other inputs unchanged. Marginal revenue product, usually abbreviated MRP, is found by dividing the change in total revenue by the change in the variable input or by multiplying marginal physical product by marginal revenue. This is also termed value of the marginal product. Marginal revenue product is a key concept for understanding the demand for productive inputs.
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A communal society, a prime component of Karl Marx's communist philosophy, was advocated by the Greek philosophy Plato.
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"The greatest things ever done on Earth have been done little by little. " -- William Jennings Bryan
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WPI Wholesale Price Index
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