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Lecture 10

ECON 2200 Lecture 10: ECON 2200 lecture 10
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Department
Economics
Course Code
ECON 2200
Professor
Samia Challal

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ECON 2200
Lecture 10
Why an increase in State Banks (SB)?
Demand deposits (checking accounts)
o Checks had been around before this, but SB “rediscovered”
them as alternate to printing and issuing bank notes
o Avoided 10% tax (that were on bank notes) by using checking
accounts
o New form of bank-created money (checks met these criteria)
Money:
1. Means of exchange (most important function for
money)
Exchange for goods and services
2. Unit of account
3. Store of value
Can keep it and use it later
o Reduced need for bank notes/coins
o Loans = creation of checking account, instead of issuing bank
notes
Before checks, the loan would take the form of bank
notes.
1. ie. If you wanted a loan of $1,000, they would give
$1,000 worth of bank notes.
For a loan, they would give you a checking account for
the worth of the loan.
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Description
ECON 2200 Lecture 10 Why an increase in State Banks (SB)? Demand deposits (checking accounts) o Checks had been around before this, but SB rediscovered them as alternate to printing and issuing bank notes o Avoided 10 tax (that were on bank notes) by using checking accounts o New form of bankcreated money (checks met these criteria) Money: 1. Means of exchange (most important function for money) Exchange for goods and services 2. Unit of account 3. Store of value Can keep it and use it later o Reduced need for bank notescoins o Loans = creation of checking account, instead of issuing bank notes Before checks, the loan would take the form of bank notes. 1. ie. If you wanted a loan of 1,000, they would give 1,000 worth of bank notes. For a loan, they would give you a checking account for the worth of the loan.
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