Grower Buys Seed

Grower Buys Seed - Model #1

Next the grower buys 500 bushels of corn seed from the seed dealer for $1,000 (a price of $2.00 per bushel).

The grower buys 500 bushels of seed from the dealer for $1,000. (Price: $2.00 per bushel)

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Grower	Dealer	Bank	Money/Deposits
Pays $1,000 for seed.	Received $1,000 for seed.	Not involved.	No change in quantity of money.
Account Balance: $0.00	Account Balance: $3,250.	Account Balance: $250.	Total Money $3,500. Deposit Liabilities: $3,500.

Grower

Dealer

Bank

Money/Deposits

Pays $1,000 for seed.

Received $1,000 for seed.

Not involved.

No change in quantity of money.

Account Balance:
$0.00

Account Balance:
$3,250.

Account Balance:
$250.

Total Money $3,500.

Deposit Liabilities: $3,500.

This transaction takes all of the money the grower borrowed from the bank leaving his account balance at zero. At the same time the seed dealer’s account balance has increased from $2,250 to $3,250, and the bank still has $250—it was not involved in this transaction.

The grower now goes back to his farm to plant the seed and attend to it for the growing season. If he has a successful season, …

…he will sell his corn seed to the seed dealer...