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Macroeconomic Impact on Business Operation. Running Head: MACROECONOMIC IMPACT
ON BUSINESS OPERATIONS Macroeconomic Impact on Business ...
Macroeconomic impact on business operations. Running head: MACROECONOMIC IMPACT
ON BUSINESS OPERATIONS Macroeconomic Impact on Business ...
Macroeconomic Impact. Running head: Macroeconomic Impact Macroeconomic Impact
Trent Roberson University of Phoenix 4 December 2006 ...
Macroeconomic Impact on Business Operations. Macroeconomic Impact on Business
Operations One of the greatest macroeconomic factors ...
Macroeconomic Impact on Business Operations. Macroeconomic Impact on Business
Operations Macroeconomic Impact on Business Operations ...
Submitted by katrinalewis on February 27, 2007
Category: Business
Words: 1537 | Pages: 7
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Macroeconomic Impact on Business Operations
Many have heard the phrase "Money makes the world go round", but where does money come from? The United States, like most other countries today, has a fractional reserve banking system in which only a fraction of the total money supply is held in reserve as currency. Early traders began to use gold in making transactions; they soon realized that it was both unsafe and inconvenient to carry gold and to have it weighed every time they negotiated a transaction. By the late sixteenth century, they had begun to deposit their gold with goldsmiths, who would store it in vaults for a fee. On receiving a gold deposit, the goldsmith would issue a receipt to the depositor. Soon people were paying for goods with goldsmiths' receipts, which served as the first kind of paper money. On receiving a gold deposit, the goldsmith would issue a receipt to the depositor. Soon people were paying for goods with goldsmiths' receipts, which served as the first kind of paper money. The goldsmiths observed that the amount of gold being deposited with them in any week or month was likely to exceed the amount that was being withdrawn. Someone came up with the idea that paper receipts could be issued in excess of the amount of gold held. Goldsmiths would put these receipts, which were redeemable in gold, into circulation by making interest-earning loans to merchants, producers, and consumers. Borrowers were willing to accept loans in the form of gold receipts because the receipts were accepted as a medium of exchange in the marketplace. This was the beginning of the fractional reserve system of banking, in which reserves in bank vaults are a fraction of the total money supply. The fractional reserve has two significant characteristics: money creation and reserve which is defined as Banks can create money through lending, and bank panics and regulation: Banks that operate on the basis of fractional reserves are vulnerable to "panics" or...
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