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. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Lecture!14!Outline(of(Last(Lecture((I. Let’s!Think!About!the!Debt:!a. Debt!Servicing!b. Opportunity!Cost!II. Bonds!and!Interest!Rates:!Inverse!Relationship!III. LongBTerm!and!ShortBTerm!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. Functi ons!o f!Mon ey!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!Mon ey!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)!!!((((((ECON(104(((11th(Edition(! !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.!&!Own ed!by!Member!Banks)!2. Member!Banks!3. Board!of!Governors!4.
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