# 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 ---