731 B
731 B
Bank Credit Cycles
Definition
The recurring patterns of credit expansion and contraction in banking, often involving initial over-extension followed by restriction as banks attempt to restore stability. These cycles can have significant effects on the broader economy.
Source Chapter
Book II, Chapter 2
Context
Smith analyses how bank credit tends to expand beyond sustainable limits before contracting, creating cycles that affect the entire economy. He shows how these cycles emerge from the interaction of bank behaviour and economic conditions.
Economic Domain
General Theory