Measures of the money supply currency accounts for

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Unformatted text preview: rrency accounts for half of M1, but only one tenth of M2. Broader concepts of money can be defined, but M1 and M2 are most important. In this chapter, we define money simply as M, without making judgments about which definition of money is better. The Fed, the Banks, and the Link from Reserves to Deposits The Federal Reserve System: the central bank of the United States, which oversees the creation of money in the United States; also known as the "Fed." The Fed, the Banks, and the Link from Reserves to Deposits Bank: a firm that channels funds from savers to investors by accepting deposits and making loans. Banks earn profits by charging a higher interest rate to borrowers than they pay to depositors. The Fed, the Banks, and the Link from Reserves to Deposits Banks are a type of financial intermediary, because they "intermediate" between savers and investors. They accept deposits from savers an...
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This note was uploaded on 06/01/2010 for the course ECONOMICS STA2012 taught by Professor Fan during the Spring '10 term at A.T. Still University.

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