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    Ch-29 Monetary System

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    Snehal Bhatt
    Money is the set of assets in an economy that people regularly use to buy goods and services from other people. The Federal Reserve (fed) serves as the nation's central bank. The money supply refers to the quantity of money available in the economy.

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    Ch-29 Monetary System

    Uploaded by

    Snehal Bhatt
    139 views13 pages
    Money is the set of assets in an economy that people regularly use to buy goods and services from other people. The Federal Reserve (fed) serves as the nation's central bank. The money supply refers to the quantity of money available in the economy.

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    Money is the set of assets in an economy that people regularly use to buy goods and services from other people. The Federal Reserve (fed) serves as the nation's central bank. The money supply refers to the quantity of money available in the economy.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    139 views13 pages

    Ch-29 Monetary System

    Uploaded by

    Snehal Bhatt
    Money is the set of assets in an economy that people regularly use to buy goods and services from other people. The Federal Reserve (fed) serves as the nation's central bank. The money supply refers to the quantity of money available in the economy.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 13

    The Monetary System

    Copyright 2004 South-Western

    29

    THE MEANING OF MONEY

    Money is the set of assets in an economy that people regularly use to buy goods and services from other people.

    Copyright 2004 South-Western

    The Functions of Money

    Money has three functions in the economy:


    Medium of exchange Unit of account Store of value

    Copyright 2004 South-Western

    The Functions of Money


    Medium of Exchange
    A medium of exchange is an item that buyers give to sellers when they want to purchase goods and services. A medium of exchange is anything that is readily acceptable as payment.

    Copyright 2004 South-Western

    The Functions of Money


    Unit of Account
    A unit of account is the yardstick people use to post prices and record debts.

    Store of Value
    A store of value is an item that people can use to transfer purchasing power from the present to the future.

    Liquidity
    Liquidity is the ease with which an asset can be converted into the economys medium of exchange.
    Copyright 2004 South-Western

    The Kinds of Money

    Commodity money takes the form of a commodity with intrinsic value.


    Examples: Gold, silver.

    Fiat money is used as money because of government decree.


    It does not have intrinsic value. Examples: Coins, currency, check deposits.
    Copyright 2004 South-Western

    Money in the U.S. Economy

    Currency is the paper bills and coins in the hands of the public.
    Demand deposits are balances in bank accounts that depositors can access on demand by writing a check.

    Copyright 2004 South-Western

    THE FEDERAL RESERVE SYSTEM

    The Federal Reserve (Fed) serves as the nations central bank.


    It is designed to oversee the banking system. It regulates the quantity of money in the economy.

    Copyright 2004 South-Western

    The Feds Organization


    The Fed was created in 1914 after a series of bank failures convinced Congress that the United States needed a central bank to ensure the health of the nations banking system.
    The Structure of the Federal Reserve System: The primary elements in the Federal Reserve System are:
    1) The Board of Governors 2) The Regional Federal Reserve Banks 3) The Federal Open Market Committee
    Copyright 2004 South-Western

    The Feds Organization


    Monetary policy is conducted by the Federal Open Market Committee.
    Monetary policy is the setting of the money supply by policymakers in the central bank. The money supply refers to the quantity of money available in the economy.

    Copyright 2004 South-Western

    The Federal Open Market Committee


    Three Primary Functions of the Fed
    Regulates banks to ensure they follow federal laws intended to promote safe and sound banking practices. Acts as a bankers bank, making loans to banks and as a lender of last resort. Conducts monetary policy by controlling the money supply.

    Copyright 2004 South-Western

    The Federal Open Market Committee


    Open-Market Operations
    The money supply is the quantity of money available in the economy. The primary way in which the Fed changes the money supply is through open-market operations.
    The Fed purchases and sells U.S. government bonds.

    Copyright 2004 South-Western

    The Federal Open Market Committee


    Open-Market Operations
    To increase the money supply, the Fed buys government bonds from the public. To decrease the money supply, the Fed sells government bonds to the public.

    Copyright 2004 South-Western

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