DSST Money & Banking Part 1

Gross private domestic investment gpdi goods refer to

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Gross private domestic investment (GPDI)  goods refer to the amount of  new   Private Capital  produced, such as plant  and equipment and new residential buildings. Liquidity Effect:  initial decline in interest rated due to an increase in the money supply Income Effect : increase in demand for funds as real income rises Keynes Effect (Price Level Effect):  If the level of prices rises, the amount of nominal money demanded and the amount  of loanable funds demanded will rise leading to a further increase in interest rates Regulation Q / Biggest impact:  Federal Reserve Board   regulation  that  limits  the  interest rate  that  banks  can  pay  on  savings deposits .   Regulation Q  is a  United States government  regulation that put a limit on the  interest rates  that  banks   could pay, including a rate of zero on  demand deposits  ( checking accounts ). Section 11 of the Banking Act of 1933 (12  U.S.C. 371a) prohibits member banks from paying interest on demand deposits, which is implemented by Regulation Q  (12 CFR part 217). The imposed zero rates on demand deposits encouraged the emergence of  money market  funds and the growth of  substitutes for and alternatives to banks.  Regulation Q ceilings for  savings accounts  were for the most part phased out in  the early 1980s by the  Monetary Control Act  of 1980. Regulation Q was put in place by the  Glass-Steagall Act  of 1933.  The key provision of Regulation Q that remains is that banks under Regulation Q cannot pay interest on checking  accounts.
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Banks also found a variety of ways to get around Regulation Q restrictions and compete for deposits. These include  creating  Negotiable Order of Withdrawal accounts  and  money market accounts  which are not considered checking  accounts. Regulation D was modified to include portions of Regulation Q, which governed (among other things) the type of entities  that may own/maintain interest bearing NOW accounts. Regulation Q no longer exists as it once did; all aspects of the  regulation are now part of Regulation D. Money Definition:  Medium of Exchange (Used to pay for goods and services),  Unit of Account  (used to measure value)  Store of Value  (A repository of purchasing power for “later”.) M1, M2, M3 Money:  M0 : The total of all physical  currency , plus accounts at the central bank that can be exchanged for physical currency.  M1 : The total of all physical  currency  part of bank reserves + the amount in  demand accounts  ("checking" or "current"  accounts).  M2 : M1 + most  savings accounts money market accounts , and small denomination time deposits (
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