Americans are demanding more new cars than the automakers can produce. The automakers need to increase prices and production to meet the new equilibrium price and quantity of cars. Finally, the Production Possibilities Curve can be used when introducing a new product. Using test markets to determine demand and equilibrium price for a product is also an option. Money is created when a financial institution makes a loan to an individual or a business.
Money is destroyed when a loan is repaid.
Depository institutions must maintain a certain amount of deposits in actual reserves. This is called a reserve requirement . This is to help maintain the stability of the US financial system and the Federal Reserve. Institutions excess reserves are the actual reserves minus the required reserves as determined by the reserve requirement. Excess reserves are the source for an institutions loan-making ability.