ECON1132 Lecture Notes - Lecture 9: Potential Output, Republican Congress, Business Cycle
Document Summary
Gradually the goldsmiths discovered that people didn"t care if they got. Lecture 9: banking and the supply of money. We looked last time at money and demand for money. Then we began to talk about the banking system. We noted we have two types of banks-- commercial banks and central banks. A commercial bank is a business firm that provides services in the hope of earning a profit. A central bank is a public institution with social responsibilities. Let"s begin now to look at commercial banks in some detail. Commercial banks as we know them grew out of the activities of the goldsmiths in the middle ages. Goldsmiths worked with gold, as did blacksmiths with iron or coppersmiths with copper. Gold was also the dominant form of money and was valuable. Goldsmiths of necessity developed secure vaults, to forestall robbery. Households and business firms who had gold as money began to bring it to the goldsmiths for safekeeping.