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# Water-Pond Metaphor

## Definition

Smith's analogy comparing a well-functioning bank to a pond where water flows in and out at equal rates, maintaining a constant level. This illustrates how proper banking maintains steady circulation without requiring excessive reserves.

## Source Chapter

Book II, Chapter 2

## Context

Smith uses this metaphor to explain how a properly managed bank can maintain steady operations when its lending and repayments are balanced. The metaphor illustrates the ideal relationship between bank advances and repayments.

## Economic Domain

General Theory

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