ECON 104 11th Edition Lecture 14 Outline of Last Lecture I II III Let s Think About the Debt a Debt Servicing b Opportunity Cost Bonds and Interest Rates Inverse Relationship Long Term and Short Term Investment Outline of Current Lecture I Money Past to Present II Functions of Money III What Exactly is Money Today IV Federal Reserve System a Four Components Current Lecture 1 Money Past to Present a Barter b Commodity Money Gold Jewels Etc c Representative i Every dollar that was printed was backed by Gold d Fiat Money i Money that is considered money because the Government says so 2 Functions of Money a Medium of Exchange Ex Accepting Dollars in Exchange for Work b Store of Value Dollars Coins that can be held onto With a high inflation can will lose value c Unit of Account Means to compare the value of assets 3 What Exactly is Money Today a M1 Currency Transaction Accounts Checking Travelers Checks i Most Liquid Form of Money b M2 M1 Savings Accounts Time Deposits 100 000 Money market Mutual Funds i Difference between M1 M2 M2 is still liquid but it requires time to become liquid Ex Having to go to the Bank to access money from Savings Account These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute c M3 M1 M2 Time Deposits 100 000 Repurchase Agreements Overnight Euro Dollars i Repurchase Agreement Businesses loaning money to one another ii Time Deposits require longer periods for money to become liquid d L Liquidity M1 M2 M3 and All Other Liquid Assets i It takes a long time to receive the true value of an asset s to receive value any amount from the asset it can be sold at a considerable discount 4 Federal Reserve System a Private Agency NOT a part of the Government b Senate Government has the power to shut down or change the rules for how it is run i Four Components 1 Regional Reserve Banks 12 in the U S Owned by Member Banks 2 Member Banks 3 Board of Governors 4 Federal Open Market Committee FDMC
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