A Commentator Says That an Increase in Lending Will Lead

question 118

Essay

A commentator says that an increase in lending will lead to an infinitely large increase in the money supply, since that money will be deposited and re-lent indefinitely. Could this possibly be true? Is it realistic?

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Definitions:

World Price

The price of a good or service in the international marketplace, influenced by the global dynamics of supply and demand.

Import Quota

A government-imposed limit on the quantity of a particular good that can be imported into a country.

Equilibrium Price

The price at which the quantity of goods demanded equals the quantity of goods supplied, resulting in a stable market condition.

Import Competition

The competition that domestic firms encounter from the products and services of foreign producers.