SU_ECO2072_W4_A1_Dunn_K

SU_ECO2072_W4_A1_Dunn_K - Money and Our Monetary System By...

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Money and Our Monetary System By Kimbra Dunn Principles of Macro-Economics
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Kimbra Dunn Money and Our Monetary System Principles of Macro-Economics When an economy exists with institutions, a form of payment is necessary. Money exists wherever there are market exchanges beyond trades and between individuals. Money can be anything that people accept as money and that performs the functions of money. Money performs three major functions of the economy. A medium of exchange A unit of account Store of value The reason why the dollar has value is because it is a good with limited supply so there is a demand for it. The reason people want money is because the money ca be used to purchase goods and services in return. The money supply is the cash held by the public plus total checking account deposits in commercial banks and other checkable accounts (SOU, 2015). Two categories of the money supply are; M1 includes currency, traveler’s check, and demand deposits. M2 equals M1 plus savings accounts, small time deposits, and most money market accounts. The most important point in the United States economy includes not just currency but also deposits in banks and other financial institutions that can be readily accessed and used to buy goods and services. The FED 2
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Kimbra Dunn Money and Our Monetary System Principles of Macro-Economics The Federal Reserve is the central bank of the United States (Mankiw, N. G. 01/2014).
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