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Additional_MoneyInflation - Money and Inflation Types of...

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1 Money and Inflation Types of Money: Commodity Money made out of goods like gold Fiat Money money used by government fiat.
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2 Monetized Economy: an economy where money is used. - barter very inefficient Origin of Banks Originally places to store commodity money. Bankers realized that they could lend out the money to earn interest.
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3 The Uses of Money Medium of Exchange Store of Value Unit of Account Commodity Money: supply controlled by the industry producing the good. Fiat Money: supply essentially controlled by the Federal Reserve Board.
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4 Definitions of Money M1: currency, checkable deposits, traveler’s checks. M2 = M1 + Additional Deposits (Time and Savings) Both can be controlled by the Federal Reserve Board.
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5 Banks and the Fed Creating Money Balance Sheet: lists assets and liabilities. Bank Assets Liabilities Checkable Deposits Loans Bonds Vault Cash Fed Deposit
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6 Reserves = Vault cash + Fed Deposit Reserve Requirement: fraction of checkable deposits that must be held as reserves.
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