All monetary systems facilitate the production and exchange of money. To achieve this purpose, the U.S. monetary system has evolved to continue to meet the three essential functions of money: it is a medium of exchange, a standard of value, and a store of value. This evolution may be observed through the changes in the form that money has taken over time as it has transitioned from a full-bodied currency system to a fiat currency. Globalization, significant events, and crises have resulted in the design and implementation of legislation that has forced changes to U.S. monetary policy, both locally and globally.
At A Glance
- The modern U.S. monetary supply system facilitates both the production and exchange of money.
- A series of crises and globalization created the current U.S. monetary system.
- There are a variety of securities that can be traded, such as money markets, commercial paper, and bankers' acceptance securities, each with its own trade market.
- The movement of money in an economy affects the velocity of money, and velocity of money can be calculated to help explain economic behavior.
- The velocity of money can be controlled by moving money in and out of an economy and can cause inflation or increase interest rates.
Regulations and statutes such as the Glass-Steagall Act, the Gramm-Leach-Bliley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act are driven by U.S. monetary policies.
- Each monetary regulation, such as the Gramm-Leach-Bliley Act and the Dodd-Frank Act, has an effect on the global economy.