The expansion of the money supply doesn’t continues forever. Several factors stop the process of expansion or even reverse it

First, federal law requires the bank to keep a percentage of it demand deposits in reserve (usually 10 to 20 percent). Bank cannot loan out all of the money people deposit.

Second, expansion will stop if the bank stops making loans. For example, if the bank cannot find any more people it believes will be able to repay a loan or if people stop putting their money into checking accounts.

Finally, if many people suddenly withdraw their money all at once, the bank must do more than stop making loans. It will have to start calling for payment of its loan so that it can increase its reserves.

None of bank’s transactions involved currency. All were completed through checking accounts.

Making a personal budget.

It’s very important to know how to develop a useful personal budget. It will help you to use your income as effectively as possible. Choices must be made concerning spending and saving. You never know whether you can afford another outing, or a disco, or a concert. What is more, you don’t know if you can afford not to save. So to do that you should keep track of your actual income and expenses for a month.

First figure out all your sources of income and list them. And remember that you should record only your take-home pay as income. You should note all deductions from your pay-cheque. Your second step should be to record how much you spend for food, entertainment, clothing, college supplies, personal care, transportation, and miscellaneous items.

By the way, you should understand the difference between fixed, optional and flexible expenses. Fixed expenses are set in advance and must be paid regularly. Flexible expenses are necessary but change with circumstances. Optional expenses vary and are not always necessary.

Then you can make an expense chart to figure out what percentage of your income is allocated for each item in the chart. Thus you can compare your income and expenses. A consistent item of overspending means that the budget should be readjusted or followed more closely. Obviously expenses should not be higher than income.

The value of college education.

An understanding of opportunity costs and tradeoffs is important personally to high school students, as well as everyone else. Sooner or later high school students make choices about what to do after graduation. What is the general relationship between a person’s education and that individual’s earning power? What is a college degree worth? How valuable is post-college schooling? These are the questions that have to be solved nearly by everyone.

Every year millions of students graduate from high school. The decisions they make will affect the rest of their lives. Some will choose to go to college; some will want to get full-time jobs; others will decide to obtain technical job training. In every case, economic reasoning will help students make better choices.

They should consider the costs and tradeoffs connected with a decision to go to college and decide whether a college education is worth the expense in terms of immediate and future personal growth and economic well-being.

The opportunity costs of going to college involve a loss of practical job experience while attending college. The tradeoffs involved in going to college include using time and money now to gain greater advantages in the future.

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