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Economic Theory of Bank Credit$
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L. Albert Hahn

Print publication date: 2015

Print ISBN-13: 9780198723073

Published to Oxford Scholarship Online: November 2015

DOI: 10.1093/acprof:oso/9780198723073.001.0001

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Forms of Granting Credit

Forms of Granting Credit

(p.144) (p.145) [1.*]A.II.3. Forms of Granting Credit
Economic Theory of Bank Credit

L. Albert Hahn

Oxford University Press

This chapter introduces the distinction between inflationary and non-inflationary credit. Non-inflationary credit occurs when granting credit does not change the number of credit relations; this could be the case when credit lines are simply extended or equal savings are made elsewhere in the economy. Inflationary credit on the other hand multiplies the number of credit relations. The newly created deposits compete with existing deposits for goods and thus increase the general price level. Inflationary credit also has further consequences for the capitalistic structure of the economy as it will prolong the production process. This prolongation in turn increases the amount of credit to maintain the purchasing power and thus affects the money market.

Keywords:   credit, inflationary credit, non-inflationary credit, inflation, credit relation

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