Ss_W12_T11_lecture_Money Banking - Reading Assignment Chapter 22 The definitions of money supply and banking system should be referred to the ones of

Ss_W12_T11_lecture_Money Banking - Reading Assignment...

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1 Reading Assignment: Chapter 22 After studying this topic, you will be able to: 1 Define money and describe its functions. 2 Describe the functions of banks. 3 Describe the functions of the central bank. 4 Explain how the banking system create money and how the central bank controls the quantity of money. Exclude: the structure of Fed on P.573-574. The definitions of money supply and banking system should be referred to the ones of Hong Kong, instead of the ones of the USA.
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2 22.1 What is money? Definition of Money Money is any commodity or token that is generally accepted as a means of payment. A Commodity or Token Money is something that can be recognized. Money can be divided up into small parts. Generally Accepted Money can be used to buy anything and everything. Means of Payment Ameans of paymentis a method of settling a debt.
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3 The Functions of Money 22.1 What is money? Medium of exchange is a object that is generally accepted in return for goods and services. Without money, you would have to exchange goods and services directly for other goods and servicesan exchange called barter. A unit of accountis an agreed-upon measure for stating the prices of goods and services. A store of valueis any commodity or token that can be held and exchanged later for goods and services. The more stable the value of a commodity or token, the better it can act as a store of value and the more useful it is as money.
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4 22.1 What is money? Money Today Money in the world today is called fiat money. Fiat money is objects that are money because the law decrees or orders them to be money. The objects that we use as money today are Currency Deposits at banks and other financial institutions Currency The notes (dollar bills) and coins that we use today are known as currency. Notes are money because the government declares them to be with the words printed on every dollar bill: This note is legal tender for all debts, public and private.Deposits Deposits at banks, credit unions, savings banks, and savings and loan associations are also money. Deposits are money because they can be converted into currency on demand and are used directly to make payments.
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5 22.1 What is money? Currency inside Banks Is Not MoneyBank deposits are one form of money, and currency outside the banksis another form. Currency insidethe banks is not money. When you get some cash from the ATM, you convert your bank deposit into currency.
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6 22.1 What is money? Official Measures of Money: M1, M2 and M3 In Hong Kong, money supply has 3 definitions: M1 consists of legal tender and demand deposits in licensed banks M1 only includes the most liquid assets used as a medium of exchange M1 = _______________ + ____________________ M1 is the narrow version of the definition of Money Supply (HK) The M2 definition is represented in the following equation: M2 = ________________________________________ where Ds =
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  • Fall '15
  • pikachu
  • Monetary Policy, Fractional-reserve banking, bank deposits

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