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Money - o Functions Control the money supply with monetary...

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10-22-07: Functions of money o Medium of exchange Accepted as payment for products and resources o Measure of value Single standard for assigning and comparing values of products and resources o Store of value Means or retaining and accumulating wealth Characteristics of money o Divisibility o Stability (value) o Portability o Durability o Difficult to counterfeit o Acceptability Money supply o If supply is high, value (buying power) goes down o If supply is low, value (buying power) goes up o Measure money supply M1- most liquid Cash, demand deposits, travelers checks M2: is M1 plus CDs, savings accounts, money market accounts, mutual funds Federal reserve system o Panic of 1907 Large banks failed People quickly took money out of banks Federal reserve system was created Went from decentralized to centralized o Board of governors 4 members+ chairman (Bernacke) o Federal reserve banks Banker’s bank 12 geographic locations o Members bank All national and state chartered banks
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Unformatted text preview: o Functions Control the money supply with monetary policy Regulate financial institutions Manage regional and national check-clearing procedures and distribute currency Supervise the federal deposit insurance of commercial banks • FDIC- Federal Deposit Insurance Corporation o Insures personal accounts in commercial banks up to a maximum of $100,000 • Banking institutions o Commercial banks (real banks) o Savings and loans associations (mortgages come from here) o Mutual savings banks o Credit unions • Non-banking institutions o Finance companies o Non-financial firms o Brokerage firms o Mutual funds o Pension funds o Insurance companies • Competition in banking o Rapid technology advancements EFTS, atms, bill payment o Increase competition Walmart Financial service firms Globalizations o Banking is Natural oligopoly Technology/ scale benefit...
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