chapter13 Lecture notes

chapter13 Lecture notes - CHAPTER THIRTEEN MONEY AND...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER THIRTEEN MONEY AND BANKING INSTRUCTIONAL OBJECTIVES After completing this chapter, students should be able to: 1. List and explain the three functions of money. 2. Define the money supply, M1 and near-monies, M2, and M3. 3. State three reasons why currency and checkable deposits are money and why they have value. 4. Describe the relationship between the value of money and the price level. 5. Identify two types of demand for money and the main determinant of each. 6. Describe the relationship between GDP and the interest rate and each type of money demand. 7. Explain what is meant by equilibrium in the money market and the equilibrium rate of interest. 8. Explain the relationship between bond prices and the money market. 9. Describe the structure of the U.S. banking system. 10. Explain why Federal Reserve Banks are central, quasi-public, and bankers’ banks. 11. Describe seven functions of the Federal Reserve System and point out which role is the most important. 12. Summarize and evaluate the arguments for an against the Federal Reserve System remaining an independent institution. 13. Describe the conditions which have caused the loss of market share of banks and thrifts to pension funds, insurance companies, mutual funds, and securities related firms. 14. Identify three major changes continuing to occur in the financial services industry. 15. Define and identify terms and concepts listed at the end of the chapter. LECTURE NOTES I. 3 Functions of Money A. Medium of exchange : Money can be used for buying and selling goods and services. B. Unit of account : Prices quoted in dollars and cents give a common standard for measuring relative worth of goods and services. C. Store of value : Money is most liquid (spendable) of all assets, a convenient way to store wealth. II. Supply of Money 172
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Money and Banking A. Definition of money: M1 includes currency and checkable deposits (see Table 13-1). 1. Currency (coins 2-3% + paper money37%) is token money which has little or no intrinsic value. a. Paper currency is about 37 percent of all M1 money supply. b. All paper currency consists of Federal Reserve Notes issued by the Federal Reserve. 2. Checkable deposits are included in M1 , since they can be spent almost as readily as currency ( account for 90% of all transactions ) and can easily be changed into currency. a. Commercial banks are a main source of checkable deposits. b. Thrift institutions (savings & loans, credit unions, mutual savings banks) also have checkable deposits such as NOW (negotiable order of withdrawal) accounts, ATS (automated transfer service) accounts, share draft accounts. 3. Qualification: Currency and checkable deposits belonging to the federal government, Federal Reserve, or other financial institutions are not included in M1. B.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/09/2009 for the course ECON 004 taught by Professor Mateer during the Fall '08 term at Northwestern.

Page1 / 7

chapter13 Lecture notes - CHAPTER THIRTEEN MONEY AND...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online