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Midterm 2 Study Guide - Money

Midterm 2 Study Guide - Money - Money is a special set of...

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Money is a special set of assets that are widely accepted as payments for goods and services When money is used as payment for goods and services, it is being used as a medium of exchange When it is used to express the relative value of goods and services, it is being used as a unit of account When it is used to hold purchasing power for future use, it is being used as store of value The Federal Reserve System determines the nation’s money supply If all money is in the form of currency, the money supply can be expanded if the central bank uses newly minted currency to buy financial assets from the public or directly from the government itself. To reduce the money supply, the central bank can sell financial assets to the public or the government Money has a low expected return compared to other assets, low risk since it always maintains its nominal value, is the most liquid of all assets, and has the lowest time to maturity
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