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Econ notes

by: Abbey Notetaker

Econ notes Econ 1051

Abbey Notetaker
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About this Document

These are notes from the 3rd semester.
General Economics
George Chikhladze,Martha Steffens
Class Notes




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This 2 page Class Notes was uploaded by Abbey Notetaker on Sunday May 1, 2016. The Class Notes belongs to Econ 1051 at University of Missouri - Columbia taught by George Chikhladze,Martha Steffens in Summer 2015. Since its upload, it has received 10 views. For similar materials see General Economics in Economcs at University of Missouri - Columbia.


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Date Created: 05/01/16
Chap 14 Functions of money  Medium of exchange o Used to buy/sell goods  Unit of account o Goods valued in dollars  Store of value o Hold some wealth in money form  Different degrees of liquidity Money Definition M1  Currency  Checkable deposits Institutions Offering Checkable Deposits  Commercial banks  Savings and loan associations  Mutual savings banks  Credit union M2  M1 plus near-monies  Savings deposits including money market deposit accounts(MMDA)  Small-denominated time deposits  Money market mutual funds  Money market securities: very safe, very liquid, short term bonds issued by Treasury Department  MMMFs vs. Hedge Funds. (very liquid) What “Backs” the money supply?  Guaranteed by government ability to keep value stable  Gold standard  Why is money valuable? o Acceptability o Legal tender o Relative scarcity  Prices affect purchasing power of money  Hyperinflation renders money unacceptability  Stabilizing moneys purchasing power o Intelligent management of the money supply-monetary policy o Appropriate fiscal policy Federal Reserve-Banking System  Historical backround(1912)  Different entities of the Fed  Board of Governors  Appointed by the President and confirmed by the Senate for 14 years  Non renewable terms  Headquarters in DC  7 governors, 1 of them is appointed as a chair  12 Federal Reserve Banks o serve as the central bank o Quasi-public banks o Bankers bank o NY Fed is the most important  Federal Open Market Committee o 12 voting members, 7 governors plus 5 presidents of district banks o makes important monetary policy decisions o meet about 8 times a year  Commercial banks and thrifts o 6,800 commercial banks o 8,700 thrifts  Big Four: BPA, JP Morgan Chase, Citi groups, Wells Fargo Federal Reserve Functions  Issue currency  Set reserve requirements: Fed mandates every commercial banks to keep fraction of total deposits in reserve  Lend money to banks(discount window)  Collect checks  Acts as a fiscal agent for U.S.  Supervise banks  Control the money supply and influence interest rates Federal Reserve Independence  Est. by Congress as an independent agency  Protects the Fed from political pressures  Feds policies cant be reversed  Fed is given a freedom to pursue its own objectives and choose monetary policy tools to do so


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