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ECON2200 Exam 2 Notes 4

ECON2200 Exam 2 Notes 4 - ECON 2200 Exam 2 Notes A central...

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ECON 2200 Exam 2 Notes A central bank typically serves as the banking systems lender of last resort. This means that the central bank MAKES LOANS TO BANKS THAT EXPERIENCE RESERVE SHORTAGES The National Bank Act of 1863 Made national bank notes legal tender Established a paper currency of uniform design for use by national banks Required national banks’ assets to include a certain amount of US treasury bonds Required double liability on the stock owned by the shareholders of national banks In 1865, Congress raised the tax on state bank notes to 10% of the value of notes in circulation. In the 40 years following this tax increase the number of state banks FIRST FELL THEN ROSE When a firm is operating at excess capacity its output is LESS THAN the output associated with minimum LRAC In the 1860s and 1870s, firms in the petroleum refining industry found that: Industry capacity exceeded market demand The price of products they sold was falling
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