Federal Reserve

Federal Reserve - Money is defined in three function or...

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Money is defined in three function or services that it provides. Money is server as a unit of account, store of value and medium of exchange. The most important function is medium of exchange. Money is often overlooked and even taken for granted. Money is one of the important concepts to be understood in the running of the world’s financial system. Money is the mechanism that enables parties to engage in an indirect exchange of good and services.Money was made with the purpose to assist in the exchange of services and goods with the different values between consumers and businesses around the globe. Money is controlled and created by the central bank in the nation; the central bank being the Federal Reserve. The Federal Reserve, or often referred to as the FED, determines the value of the dollar and is constantly evaluates the economic strength as well as making essential changes to the financial policy. The FED does this as an effort to stabilize the health of the economy since the economy becomes more resourceful when it has only one item serving as its exchange medium; such as the dollar. As the saying goes; money makes the world go round, has proven over the years to be factual. Money is what drives much of the economies activities and makes communication and business in our economy much easier for the consumers. According to Mankiw, money acts as a medium for exchange, a unit of accounts, and as a store of value. When money acts as a medium of exchange, it basically acts as a middle man between consumers as well as their purchases. When money is used as a unit of account it services consumers so they can estimate and handle the prices of specific products; for example this task could also be used to document debt. Because of this function, items such as credit cards are unable to be used as a money substitute but in turn the card companies must be paid in the form of money for any charges placed on the card. The last money function, a store of value, allows consumers to obtain the value of specified material ownership. There are a number of goods or products that can be reserved for an extended time frame. As this occurs and the value rises, the goods or services reserved may be changed into money. The central bank is a banking institute that has been given a select advantage to lend out their currency to the government. Just as a regular commercial bank operates, so does the central bank. The central bank also charges an interest rate to borrowers; their main borrowers being
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This note was uploaded on 02/25/2012 for the course LAW LAW taught by Professor Animesh during the Spring '12 term at DeVry Phoenix.

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Federal Reserve - Money is defined in three function or...

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