econ
1. If ours were a barter economy, how would you pay your tuition bill? What if your college did not want the goods or services you offered in payment?
Answer) In the barter economy, we would be paying the tuition bill in the form of any good or services that are somehow useful and benefit to the college. Example, we can barter tuition with food items so college can give those to the professors and other staff members of the college. And also services in the form of building maintenance, cleaning, etc. If the college did not want the goods or services then we will have to pay the tuition fees in terms of money so the college can exchange it with whatever it has get which money can get it.
2. How is “money” defined, both conceptually and in practice? Does the U.S. money supply consist of commodity money, full-bodied paper money, or fiat money?
Answer) Conceptually Money is defined as medium of exchange in goods and services. In practice Money serves as store of value. It can be sold anytime to purchase goods and services. US Money consists of fiat Money. Fiat money is money that is decreed as such by the government. It is of little value as a commodity, but it maintains its value as a medium of exchange because people have faith that the US government will stand behind the pieces of printed paper and limit their production.
3. What is fractional reserve banking, and why is it the key to bank profits? (Hint: What opportunities to make profits would banks lose if reserve requirements were 100 percent?) Why does fractional reserve banking give bankers discretion over how large the money supply will be? Why does it make banks potentially vulnerable to runs?
Answer) Fractional-reserve banking is the practice whereby a bank holds reserves (to satisfy demands for withdrawals) that are less than the amount of its customers' deposits. Banks keep only a fraction of their deposits set aside as reserves to conduct day-to-day transactions. Banks make profit by lending money
Answer) In the barter economy, we would be paying the tuition bill in the form of any good or services that are somehow useful and benefit to the college. Example, we can barter tuition with food items so college can give those to the professors and other staff members of the college. And also services in the form of building maintenance, cleaning, etc. If the college did not want the goods or services then we will have to pay the tuition fees in terms of money so the college can exchange it with whatever it has get which money can get it.
2. How is “money” defined, both conceptually and in practice? Does the U.S. money supply consist of commodity money, full-bodied paper money, or fiat money?
Answer) Conceptually Money is defined as medium of exchange in goods and services. In practice Money serves as store of value. It can be sold anytime to purchase goods and services. US Money consists of fiat Money. Fiat money is money that is decreed as such by the government. It is of little value as a commodity, but it maintains its value as a medium of exchange because people have faith that the US government will stand behind the pieces of printed paper and limit their production.
3. What is fractional reserve banking, and why is it the key to bank profits? (Hint: What opportunities to make profits would banks lose if reserve requirements were 100 percent?) Why does fractional reserve banking give bankers discretion over how large the money supply will be? Why does it make banks potentially vulnerable to runs?
Answer) Fractional-reserve banking is the practice whereby a bank holds reserves (to satisfy demands for withdrawals) that are less than the amount of its customers' deposits. Banks keep only a fraction of their deposits set aside as reserves to conduct day-to-day transactions. Banks make profit by lending money