Chapter 14 - checks, supervising and regulating banks,...

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Money and the Federal Reserve System CHAPTER SUMMARY Money serves three functions: it must act as a medium of exchange, unit of account, and store of value. Note that credit cards are not money. Money must also be "scarce" if it is to have value and it must be portable or divisible. Money in the United States is fiat money. The definitions of money include M1, M2 and M3. The definition of the money supply used by the Federal Reserve system (Fed) is M2. So, the money supply is the supply of M2. The Fed's organizational structure is introduced as well as its functions. The most important function of the Fed is to control the money supply. Other functions include clearing
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Unformatted text preview: checks, supervising and regulating banks, maintaining and circulating currency, protecting consumers (e.g. Equal Credit Opportunity Act) , and keeping Federal government accounts and gold. Banking in the United States has undergone significant changes in the last decade or so. These changes are likely to continue. One of the most significant pieces of legislation affecting banking since the 1930s was the passage of the Monetary Control Act of 1980. An investigation of the S&Ls crisis is also briefly discussed....
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This note was uploaded on 03/19/2011 for the course ECON 302 taught by Professor Wroee during the Spring '08 term at American River.

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