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EXCESS RESERVES: The amount of bank reserves over and above those that the Federal Reserve System requires a bank to keep. Excess reserves are what banks use to make loans. If a bank has more excess reserves, then it can make more loans. This is a key part of the Fed's ability to control the money supply. Using open market operations, the Fed can add to, or subtract from, the excess reserves held by banks. If the Fed, for example, adds to excess reserves, then banks can make more loans. Banks make these loans by adding to their customers' checking account balances. This is of some importance, because checking account balances are an major part of the economy's money supply. In essence, controlling these excess reserves is the Fed's number one method of "printing" money without actually printing money.

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Lesson 19: Monopolistic Competition | Unit 5: Evaluation Page: 20 of 22

Topic: The Good: Differences <=PAGE BACK | PAGE NEXT=>

  • While monopolistic competition is inefficient and has excess capacity, all is not bad:

    • Competition Among the Many: Although monopolistic competition is not perfect competition, it is competition.

    • Price and Marginal Cost: While monopolistic competition does not produce the quantity that equates price and marginal cost, the difference is often NOT very big.

    • Different Preferences: Because monopolistic competition firms offer different products, buyers are able to satisfy different tastes and preferences.

  • Monopolistic competition may actually be a BETTER market structure than perfect competition -- at least better for real world people who live in the real world.


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LIMITED LIABILITY

A condition in which owners of a business are not personally held responsible for the debts created by the business. Corporations are the most noted types of business organizations in which owners have limited liability. Limited liability makes it possible for a business to accumulate large sums of money and thus to take advantage of large scale production. The alternative to limited liability is unlimited liability, a characteristic of proprietorships and partnerships.

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Today, you are likely to spend a great deal of time touring the new suburban shopping complex looking to buy either a package of 3 by 5 index cards, the ones without lines or a blue mechanical pencil. Be on the lookout for slightly overweight pizza delivery guys.
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Natural gas has no odor. The smell is added artificially so that leaks can be detected.
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Financial Times Stock Exchange 100 stock index (UK)
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