Grower Sells Seed

Grower Sells Seed—Model #3

Similar to when the grower purchased seed from the dealer, when the dealer purchases the new seed from the grower, the dealer transfers to the grower a promise from the same bank that transferred the promise from the grower.

Several months later the grower sells 800 bushels of his seed to the dealer for $1,500. (Price: $1.88 per bushel. As before more seed on the market tends to drive the price down.)

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Grower	Dealer	Bank	Money/Deposits
Sells corn seed for $1,500.	Pays $1,500 to grower.	Not involved.	No change in quantity of money.
Account Balance: $1,500.	Account Balance: $1,750.	Account Balance: $1,250.	Total Money: $4,500. Deposit Liabilities: $4,500

Grower

Dealer

Bank

Money/Deposits

Sells corn seed for $1,500.

Pays $1,500 to grower.

Not involved.

No change in quantity of money.

Account Balance:
$1,500.

Account Balance:
$1,750.

Account Balance:
$1,250.

Total Money: $4,500.

Deposit Liabilities: $4,500

Note: From the sale proceeds the grower must repay his loan from the bank.

On the next page we show what happens when the grower pays his loan...