Money Market (Money and Banking) What is Money? A financial asset with the following functions: Medium of exchange: An asset that individuals acquire for the purpose of trading rather than for their own consumption. A store of value: Means of holding purchasing power over time A measure of value (unit of account): Measure used to set prices and make economic calculations 2 What is money? Money is anything that serves as a commonly accepted medium of exchange Money and Income
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country’s money supply that results from banks being able to lend. The size of the multiplier effect depends on the percentage of deposits that banks are required to hold as reserves. In other words‚ it is money used to create more money and is calculated by dividing total bank deposits by the reserve requirement. Investopedia explains ’Multiplier Effect’ The multiplier effect depends on the set reserve requirement. So‚ to calculate the impact of the multiplier effect on the money supply‚ we start
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MONEY AND BANKING CONTENTS What is MONEY? 3 Characteristics of money 3 Measurements of money 4 Money and the economy 6 Relationship between Prices and Inflation 6 Why Money Supply Matters 7 Banking 8 General History 8 History in United States 8 Banking basics 9 Other Financial Institutions 9 International Banks 10 Structure of banking industry in U.S. 10 Interest Rates 11 Banking Business 11 Liquidity management by banks 11 Multiple Deposit Creation 14 Banking services 16
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deposits‚ make loans • Banks make money on the spread between what they take in from loans and what they pay out on interest on deposits o (minus their expenses) • Government licensed institutions o Can be licensed by the federal government or the state government o Federally chartered or state chartered • Receiving‚ keeping‚ lending‚ money with interest o "Banco" ( bench or desk • Borrow short lend long o Borrow money short term‚ and lend in the long term
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* Function of money * Store of wealth (value) is any form of commodity‚ asset‚ or money that has value and can be stored and retrieved over time. Real estate‚ precious metals‚ gem stones‚ and similar assets can be a store of value. In all of these cases‚ people can exchange these items and hold them for varying periods of time. The value may even rise in storage‚ and sometimes a store of value can be held strategically with the goal of enjoying a rise in value‚ as for example with people who
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different than they were before ATMs Credit card such as Mastercard and Visa Money: anything that Is generally accepted in payment for goods and/or services or in the repayment of debts Money and wealth are not the same Business cycle: the up and down movement of aggregate output in the economy Before a recession‚ there is a downturn in the money growth rate but there is no measure that ties the business cycle to the money growth rate Price level: the average price of goods and services in tan economy
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0 The use of money and its transmission through the economy by means of a banking system characterise modern economies. Money has been used for thousands of years‚ but has evolved to more sophisticated forms and its transmission has improved over time. There have long been questions over the effects money and banking have in the economy. Frequently they have given rise to intense debate‚ and are seldom far from discussion on the economy’s performance‚ prices‚ exchange-rates and so on. The British
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potentially serve as money? Consider each as (1) a medium of exchange‚ (2) a unit of account‚ and (3) a store of value. a. Visa credit card It is not money because it fails the store of value test. b. Federal Reserve note Yes it can serve as money. c. Dog No‚ it cannot be used. d. Beer mug No‚ it cannot be used. 4. What backs the US dollar? Include the distinction between commodity money and fiat money in your answer. Commodity money is anything that serves as money while having market
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Chapter 8 THE DEMAND FOR MONEY STEPHEN M. GOLDFELD Princeton University DANIEL E. SICHEL* Board of Governors of the Federal Reserve System Contents 1. 2. Introduction Overview of empirical difficulties 2.1. 2.2. U.S. money demand Money demand: International evidence A brief theoretical overview A variable-by-variable review Money demand and the partial adjustment mechanism Criticisms and modifications of the partial adjustment model Dynamic models that impose long-run
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Lecture Notes on MONEY‚ BANKING‚ AND FINANCIAL MARKETS Peter N. Ireland Department of Economics Boston College irelandp@bc.edu http://www2.bc.edu/~irelandp/ec261.html Chapter 3: What Is Money? 1. Meaning of Money 2. Functions of Money Medium of Exchange Unit of Account Store of Value 3. Measuring Money Theoretical Measures Empirical Measures Federal Reserve’s Monetary Aggregates This chapter begins by defining money in basic terms. It then discusses the various functions of money in the economy
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