Medium of exchange -
- Used to barder our trade
- Unit of account = what its worth
- Store of value - dosent fluctuate
- Paper money back by tangable product
- Commodity money
- get the value from the material is made of.
- Durability -
- Portability carry money anywhere
- Divisibility -
- Uniformity -all money is identical
- Scarcity -
- Acceptability - everywhere you go
Paper, dollars, coins Money market accounts
Traders checks Accounts held by banks outside the US
Checable deposists - Demand deposits Adding M1 money
75% 25%
More liquid
Reserve requirnments
Reserve Ratio - banks required reserves of money
Excess reserves = actual reserves - required reserves
Control lending ability thus controlling how much banks make by makeing out loans.
Excess Reserves x Monetary Multiplier = Max checkable deposit creation.
Monetary multiplier = 1/required reserve ratio
Monetary Policy - is influenceing the economy that changes in reserves which influences the money supply and available credit.
- The reserve requirment % is set by the FED of the minumum reserve a bank must keep
- Discount rate - rate of interest that the FED charges for overnight loans to banks.
- Federal fund rate rate at which FDIC members charge each other for loans
- OMO - Open Market aoperation - buy or sell securities.
- Fed buys bonds to expand money supply
- Prime rate - interest rate at which banks charge their most worthy borrowers = low rate
- Discount Rate and federal fund rate decrease - decrease Expansionary = Monetary policy, Increase Contrationary = monetary policy.
Discount rate v ^
Federal fund rate v ^
regulated reserve v ^
Recession = Increase money supply,
Tight money policy goes up in value,
Easy Money goes down in value
No comments:
Post a Comment