$$$ Chapter 13 Money and Banking $$$ by n26GQ3


									            $$$ Chapter 13 Money and Banking $$$
Money’s function
   Used as a medium of exchange (no longer any need to barter – bartering is very
   Used as a unit of account – it can be used to determine something’s relative worth
      - $10 for a music CD
   Used as a store of value – people don’t typically spend all their money, so they
      store it in a piggy bank until they need it. (at this point ignore inflation)

The Supply of Money or Money Supply
    M1 – includes currency (in the hands of the public only, not the vault of the
      Federal Reserve) and all checkable/demand deposits
    M2 – includes everything from M1 + (NEAR MONIES) Small time deposits
      (less than $100,000), and all money market accounts
    M3 – includes everything from M2 + plus large time deposits (over $100,000)

The Money Market Graph
      - Increasing the supply of money will decrease the nominal interest rates

Federal Reserves Functions
    Issuing currency
    Setting reserve requirements
    Lending money to banks and thrifts (a thrift is a type of bank)
    Clearing checks
    Acting as fiscal agents (basically offers financial services to the govt.)
    Supervises banks (makes sure everyone is obeying the regulations)
    Controls the money supply (most important)

     Watch the movie on the FED

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