macsg10 - 10 [25] The Money Supply and the Federal Reserve...

  • Cornell University
  • ECON 1102
  • Notes
  • 1241640962_ch
  • 21
  • 82% (11) 9 out of 11 people found this document helpful

This preview shows page 1 - 3 out of 21 pages.

24710 [25]The Money Supply and theFederal Reserve SystemChapter objectives:1.Identify the three functions of money. List the various types of money and thedifferences among them.2.Identify two different measures of the U.S. money supply.3.Determine which items are assets and which are liabilities on a bank’s balancesheet. Distinguish among total, excess, and required reserves. Describe theprocess of deposit creation. Derive and explain the importance of the moneymultiplier.4.Outline the functions of the Federal Reserve (the Fed). Identify the threemonetary policy tools of the Fed and how they are adjusted to increase (decrease)the money supply.5.Analyze the Fed’s ability to expand or contract reserves and the money supply.This chapter begins to build a model of the financial market that continues in Chapter 11 (26), where thefactors that determine the demand for money holdings and the establishment of money marketequilibrium are considered. This model will then be combined with the aggregate expenditure model inChapter 12 (27). It is important that you develop a good understanding of financial markets at this point.BRAINTEASER:In 2000 the United States introduced its eighth dollar coin—the Sacagawea goldendollar. Over one billion of the coins were minted during 2000. About half remained in the vaults ofFederal Reserve Banks and the U.S. Mint and the other half were in circulation. However, a largeproportion of the “circulating” dollars were being hoarded. Are the Sacagawea dollars “money”? Inpractice, do they perform the functions of money?OBJECTIVE 1:Identify the three functions of money. List the various types of money and the differences amongthem.
We have textbook solutions for you!
/Macroeconomics-for-Today-10th-Edition-9781337613057-782/
The document you are viewing contains questions related to this textbook.
Chapter 15 / Exercise 16
Macroeconomics for Today
Tucker
Expert Verified
248Study Guide to Principles of MacroeconomicsMoney fulfils three functions in the economy.The three functions of money are:(a)a medium of exchange (or means of payment)(b)a store of value(c)a unit of account (page 181 [493])Before money, there was barter. But because trading goods for goods relies on a doublecoincidence of wants (where each trader must be willing to trade something that the other trader is willingto accept), barter was inefficient.Commodity money(a good that has some value over and above its valueas money) was an intermediate stage between barter and thefiat moneyof the modern economy. Gold andcigarettes are examples of commodity money. Dollar bills (Federal Reserve notes) are fiat money—theyderive their value from the willingness of individuals to accept them as payment.That willingness, inturn, derives from the government’s declaration that its notes are legal tender—an acceptable means ofsettling all debts, private and public.To ensure compliance, the government must protect its currencyfrom being debased, either through forgery or by printing too much of it. (page 182 [494])

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 21 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Winter
Professor
WISSINK
Tags
Federal Reserve The Fed, Monetary Policy, Federal Reserve System
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Macroeconomics for Today
The document you are viewing contains questions related to this textbook.
Chapter 15 / Exercise 16
Macroeconomics for Today
Tucker
Expert Verified

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture