UMass Amherst ECON 104 - Exam 2 Study Guide (12 pages)

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Exam 2 Study Guide

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Exam 2 Study Guide


This Study Guide consists of Definitions, Graphs, and Lecture Note Summary's.

Study Guide
University of Massachusetts Amherst
Econ 104 - Introduction to Macroeconomics

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ECON 104 11th Edition Exam 2 Study Guide Lectures 12 20 Lecture 12 October 27 Lecture 13 October 29 Lecture 14 November 3 and Lecture 15 November 5 The Money Supply and the Federal Reserve System Chapter 10 An Overview of Money o What is Money o Commodity and Fiat Monies o Measuring the Supply of Money in the United States o The Private Banking System How Banks Create Money o A Historical Perspective Goldsmiths o The Modern Banking System o The Creation of Money o The Money Multiplier The Federal Reserve System o Functions of the Federal Reserve o Expanded Fed Activities Beginning in 2008 o The Federal Reserve Balance Sheet How the Federal Reserve Controls the Money Supply o The Required Reserve Ratio o The Discount Rate o Open Market Operations o Excess Reserves and the Supply Curve for Money Definitions Money A means of payment a store of value and a unit of account Barter The direct exchange of goods and services for other goods and services o A barter system requires a double coincidence of wants for trade to take place That is to effect a trade you have to find someone who has what you want and that person must also want what you have Medium of Exchange What sellers generally accept and buyers generally use to pay for goods and services Store of Value An asset that can be used to transport purchasing power from one time period to another Liquidity Property of Money The property of money that makes it a good medium of exchange as well as a store of value It is portable and readily accepted and thus easily exchanged for goods Unit of Account A standard unit that provides a consistent way of quoting prices Commodity Monies Items used as money that also have intrinsic value in some other use Fiat or Token Money Items designated as money that are intrinsically worthless Legal Tender Money that a government has required to be accepted in settlement of debts Currency Debasement The decrease in the value of money that occurs when its supply is increased rapidly M1

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