Notes2 Chap 16

Notes2 Chap 16 - Savings can increase: Households increase...

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Savings can increase: Households increase savings (ie spend less) Government can decrease deficit spending (ie borrow less) or run a surplus I. Investment (business spending) -New capital -Inventories -Residential housing Money vs Financial assets What is counted as money? M1 = Currency and coins, demand deposit and travelers checks, credit cards are not money -When holding money you earn no (or very little) interest -With financial assets you do -So people hold money for liquidity (ie its ability to immediately purchase goods and services) M1 = Perfect liquidity M2 = M1 + savings accounts + small time deposits (3 month cd) Fiat Money + commodity money (does have intrinsic value) -no intrinsic value Fed- Federal Reserve Central bank of the US Board of governors: Located in DC -7 board members -Chairman: Ben Bernake -Each member appointed 14 year term -12 regional banks 2 functions of the fed: 1. Oversees the banking system -Regulates banking system -Acts as banks bank (holds bank reserves) -Acts as a lender of last resort
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This note was uploaded on 04/08/2008 for the course ECO 181 taught by Professor Cherry during the Fall '07 term at SUNY Buffalo.

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Notes2 Chap 16 - Savings can increase: Households increase...

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