BIOM 121 1nd Edition Lecture 48 Outline of Last Lecture I. What Is Money?a. Thing of Value b. Barter and the Invention of Money c. The Function of Money d. What Can Serve As Money?Outline of Current Lecture I. Definitions of Money II. How Do Banks Create Money?Current LectureI. Definitions of Money a. We will use M1 definition of the money supply because it corresponds most closely to money as a medium of exchange, keeping two key points in mind:i. The money supply consists of both currency and checking account deposits ii. Banks play an important role in the way the money supply increases and decreases II. How Do Banks Create Money?a. Banks have to pay interest on liabilities i. Examples:1. Interest paid on savings account, cost of preparing monthly statements, ATMs, interest rates on loansb. Banks cannot buy stock i. Can only buy government issued bonds c. Reservesi. Money banks cannot use for loans or securities ii. Banks always run liquidity risk 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
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