CFO10e_macro10_oneclick - The Money Supply and the Federal Reserve System 10 Chapter Outline An Overview of Money What Is Money Commodity and Fiat

CFO10e_macro10_oneclick - The Money Supply and the Federal...

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Chapter Outline 10 The Money Supply and the Federal Reserve System An Overview of Money What Is Money? Commodity and Fiat Monies Measuring the Supply of Money in the United States How Banks Create Money A Historical Perspective: Goldsmiths The Modern Banking System The Creation of Money The Money Multiplier The Federal Reserve System Functions of the Federal Reserve The Federal Reserve Balance Sheet How the Federal Reserve Controls the Money Supply The Required Reserve Ratio The Discount Rate Open Market Operations The Supply Curve for Money
Three Functions of Money WHAT IS MONEY? Money is anything that is generally accepted as a medium of exchange. (1) A Means of Payment, or Medium of Exchange barter The direct exchange of goods and services for other goods and services. medium of exchange, or means of payment What sellers generally accept and buyers generally use to pay for goods and services.
Need Double Coincidence of Wants in a Barter Economy Cook Farmer Mover Writer Carpenter Barber wants furniture wants haircut wants corn needs to eat needs to move wants to read a novel
Three Functions of Money (2) A Store of Value store of value An asset that can be used to transport purchasing power from one time period to another . (3) A Unit of Account unit of account A standard unit that provides a consistent way of quoting prices. liquidity property of money The property of money that makes it a good medium of exchange as well as a store of value: It is portable and readily accepted and thus easily exchanged for goods.
AN OVERVIEW OF MONEY commodity monies Items used as money that also have intrinsic value in some other use. COMMODITY AND FIAT MONIES fiat, or token, money Items designated as money that are intrinsically worthless. legal tender Money that a government has required to be accepted in settlement of debts. currency debasement The decrease in the value of money that occurs when its supply is increased rapidly.
AN OVERVIEW OF MONEY MEASURING THE SUPPLY OF MONEY IN THE UNITED STATES M1, or transactions money: Money that can be directly used for transactions. You can buy stuff with it! M1 currency held outside banks + demand deposits + traveler’s checks + other checkable deposits Demand Deposits are checking accounts.
AN OVERVIEW OF MONEY M2: Broad Definition of Money near monies Close substitutes for transactions money, such as savings accounts and money market accounts. M2 M1 + savings accounts + money market accounts + other near monies M2, or broad money M1 plus savings accounts, money market accounts, and other near monies.
Monetary Aggregates 8 of 36 Monetary Aggregates Value as of Feb 2013 ($Billions) M1 = Currency 1095.2 + Travelers Checks 3.8 + Demand Deposits 930.2 + Other Checkable Deposits 462.7 Total M1 2491.9 M2 = M1 + Small Denomination Time Deposits 617.1 + savings deposit and MMDA 6680.9 + Retail MMMF 631.2 Total M2 10421.1
Monetary Aggregates Link to Current Data
Question: US population about 315 million people Currency in circulation about $1100 billion, mostly $100 bills $3,490 per person Where is this money?

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