ECO CH 16 - Moneyhasthreefunctions:

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Money has three functions: 1) Medium of exchange-an item that buyers give to sellers when they want to purchase goods and  services              2) Unit of account-the yardstick people use to post prices and record debts  3) Store of Value-an item that people can use to transfer purchasing power from the present to the future   Liquidity-the ease with which an asset can be converted into the economy’s medium of exchange   Kinds of Money 1) Commodity Money-money that takes the form of a commodity with intrinsic value  2) Fiat Money-money without intrinsic value that is used as money because of government decree   Currency-the paper bills and coins in the hands of the public Demand Deposits-balances in bank accounts that depositors can access on demand by writing a check Federal Reserve-The Central Bank of the United States Central Bank-An institution designed to oversee the banking system and regulate the quantity of money in  an economy The Fed has two jobs 1) Regulate banks and ensure the health of the banking system. 2) Control the quantity of money that is made available in the economy, called the money supply. -Decisions by policymakers concerning the money supply constitute monetary supply. Monetary Supply- the setting of the moneysupply by policymakersin the central bank 100% Reserve Banking Reserves- Deposits that banks have received but have not loaned out
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ECO CH 16 - Moneyhasthreefunctions:

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