Chap 29 PwrPnts - Chapter 29: The Monetary Money is the set...

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Chapter 29: The MonetarySystemMoneyis the set of assets in an economythat people regularly use to buy goods andservices from other people.The functions of money in the economyMedium of exchangeUnit of accountStore of value1
The Meaning of MoneyMedium of exchangeAn item that buyers give to sellers whenthey want to purchase goods andservices.Unit of accountYardstick people use to post prices andrecord debtsStore of valueAn item that people can useto transfer purchasing powerfrom the present to the future.2
The Meaning of MoneyLiquidityEase with which an asset can beconverted into the economy’s medium ofexchange3
4Commoditymoney:takes the form of acommodity withintrinsic valueFiat money:- money without intrinsic value- used as money because ofgovernment decreeThe kinds of money
Money in the U.S. economyCurrencyPaper bills and coins in the hands of thepublicDemand depositsBalances in bank accountsthat depositors can accesson demand by writing a check5
FigureTwo measures of the U.S. money stock16The two most widely followed measures of the money stock are M1 and M2. Thisfigure shows the size of each measure in 2007Forourpurposes:“money stock” = “money supply” = “quantity of money in the economy”
Where is all thecurrency?
7
The Federal Reserve SystemThe Federal Reserve (The Fed)The central bank of the United StatesCentral bankInstitution designed toOversee the banking systemRegulate the quantityof money in theeconomy8
The Fed was created in 1913Run by a Board of governors7 members appointed by the president &confirmed by the SenateThe Chairman is the mostimportant of the 7 members

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Term
Spring
Professor
Lincoln
Tags
Microeconomics, Federal Reserve The Fed, Monetary Policy, Federal Reserve System, Fractional reserve banking

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