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Currency

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					Functions of
Money
        Functions of Money
• Medium of Exchange
  – Buyers and sellers accept
• Unit of Accounting
  – Measurement of value
• Store of Value
  – Purchasing power
       Characteristics of Money
•   Durable
•   Portable
•   Divisible
•   Stable in Value
•   Scarce
•   Accepted
           Types of Money
• Commodity Money
  – Cattle and gems
• Representative Money
  – Gold and silver standard
• Fiat Money
  – Government order
• Legal Tender
  – Must be accepted by law
       Money and Near Money
•   Currency
•   Checks
•   Credit Cards
•   Debit Cards
•   Near Money- savings accounts
                M1 and M2
• M1
  – All currency, checkable deposits, travelers
    checks
• M2
  – All M1 and savings, time deposits, money
    market deposit accounts…
Organization of Fed
       Functions of the Fed
• Check Clearing
• Fiscal Agent
• Supervises member banks
• Holding Reserves/Setting Reserve
  Requirements
• Supply Paper Currency
• Regulating Money Supply
             Money Supply
• Loose Money Policy
• Tight Money Policy
• Fractional Reserve Banking
  – Reserve Requirements
• Money Expansion
  – Money Multiplier
    Regulating Money Supply
• Discount Rate
  – Prime Rate
• Federal Funds Rate
• Open-market Operations

				
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