Monetary Econ overview (cont.)
Monetary Econ overview (cont.) Econ 3310
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This 3 page Class Notes was uploaded by Anthony Welch on Tuesday September 6, 2016. The Class Notes belongs to Econ 3310 at East Tennessee State University taught by Dr. Warren Mackara in Fall 2016. Since its upload, it has received 26 views. For similar materials see Monetary Economics in Economics at East Tennessee State University.
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Date Created: 09/06/16
Monetary Economics Notes #2 (end of intro/overview) introduction/overview Depository Institutions – the most familiar type and largest group of financial intermediaries. they include savings and loan associations, credit unions, commercial banks, and mutual savings banks. checkable deposits – deposits that are subject to withdrawal by check. The Federal Reserve – vastly influences how depository institutions act as intermediaries and affect the money supply. also has great influence over other financial markets and institutions. monetary policy – the federal reserve’s efforts to maximize the overall health and stability of the U.S. economy. business cycle – the collection of short-run deviations from the long-run growth path of an economy expansion – economic activity where total quantity of goods and services being sold increases as unemployment decreases. recession – economic activity where total quantity of goods and services being sold decreases as unemployment rises. fiscal policy – government taxing decisions and spending with the intention of speeding up or slowing down certain economic activity laissez-faire – the view that the government should have a hands-off policy in regard to the economy, meaning that the government should not intervene economic activity and let the market fix the problems. Chapter 2 What is money? What do we use money for? – as a medium of exchange (generally accepted in exchange for most goods and services) - money simplifies and encourages exchange - money facilitates specialization within companies, so they narrow their product line and become much more efficient. - increases the want satisfaction with resources, which means the consumer gets more satisfaction with usage of the resources - Unit of Account/Standard of value: to communicate how much things are worth. (primary) - Store of Value – a way of storing unspent income (secondary) - Standard of deferred payment – used to express terms of debt and also to pay off debt What do we use as money? paper money, metal coins, plastic cards, electronic transaction - money helps everyone receive the goods and services they need and want in life - money is a catalyst, not a resource (increases velocity of exchange, not the actual item that is ultimately desired) - liquid assets (liquidity – ease, speed, and convenience you can convert financial instrument to medium of exchange without significant exposure to capital loss) o capital loss – selling financial instrument for less than one bought it for transaction costs of exchange – expenses associated with exchanging your goods and/or services. this means there will be less resources available for production and consumption. information – one of the largest costs has to do with information. each company has to advertise and get the word out to everyone what products they offer, so that other companies and people know where to exchange their money or goods to people who want them for the resources they already have. barter system – direct exchange of goods and services without the use of money problems – must have a double coincidence of wants, where both companies have what the other wants. there would have to be multiple transactions to obtain the item(s) you want. this method discourages exchange because it is complicated and tedious. limits specialization because companies want to produce as many goods and services as possible so they can exchange for more products.
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