chapter 20 - there are several ways of referring to the...

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Hanifa Ayunisa January 18, 2011 Chapter 20 According to chapter 20, I have learned that economic growth and the creation of jobs depend on money. Money is so important to the economy that many institutions have evolved to manage money and to make it available to people when they need it. Money is anything that people generally accept as payments for goods and services. And a long time ago, people traded for what they wanted. Perhaps one person had a healthy sheep. Another person had a delicious grill chicken. Each wanted what the other had. To solve this, they traded. This is called barter. Sometimes, it was hard for people to put a barter price on things because in the beginning, things were not very consistent. So, instead of barter, people began to use money as a form of payment. This chapter also talks about money supply. Money supply is the amount of money the Federal Reserve Bank makes available for people to buy goods and services, and
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Unformatted text preview: there are several ways of referring to the money supply: M-1 and M-2. M1is the most liquid definition of the money supply: they are directly and immediately usable as a medium of exchange. M1 includes currency (coins and paper money) held by the public (what we have in our purses, wallets, and homes), and checkable deposit (what we have in our checking account). On the other hand, M2 is a little less liquid than M1. M2 includes: M1, Savings deposits and money market deposit account, certificates of deposit (time accounts) less than $100,000, and money market mutual fund balances, which can be redeemed by phone calls, checks, or through the Internet. I also have learned that money supply needs to be controlled because it is important to have an organization that controls the money supply to try to keep the U.S. economy from growing too fast or too slow....
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