In this we talked about the details of money

1. Functions of Money
Panchali Sengupta

2. Unit 9 - Functions of Money
 The Functions of Money
A society without any form of money is called a
barter economy. Goods and services are traded
directly for other goods and services.
In a barter economy there must be a double
coincidence of wants for a trade to take place.
Macroeconomics

3. Unit 9 - Functions of Money
 The Functions of Money
In a barter economy trading and
specialization are limited.
Thus, the standard
of living is lower.
Macroeconomics

4. Is money the root of all evil?
1. Yes
2. No
3. Not sure
4. Most of the time
0 of 5

5. Functions of Money
 An economy without any form of money
(barter) still is likely to have acts of robbery,
burglary and violence. Thus, money must not
be the root of all evil.
 Money makes it
easier to commit
crimes and commit evil.
Macroeconomics

6. Which of the following is NOT a
recognized function of money
1. Medium of
exchange
2. Standard of value
3. Creator of wealth
4. Store of value
0 of 5

7. Functions of Money
 Medium of Exchange
Money is exchanged for products.
Macroeconomics

8. Functions of Money
 Standard of Value
Money prices make it easier to determine
how much products are worth.
Macroeconomics

9. Functions of Money
 Store of Value
Money makes it easier to accumulate wealth.
Macroeconomics

10. Functions of Money
 Money Supply Measures
Common U.S. money supply measures are:
 The Monetary Base
 M1
 M2
 M3
Macroeconomics

11. Functions of Money
 Money Supply Measures
The monetary base is:
Bank reserves + Currency in the Hands of
the Non-bank Public.
Bank reserves are funds held by banks that
can be loaned out.
Currency includes paper money and coins.
Macroeconomics

12. Functions of Money
 Money Supply Measures
M1 = Currency + Traveler’s Checks +
Demand Deposits + Other Checkable
Deposits.
M1 contains forms of money that you can
use to buy common products at groceries,
department and other stores.
Macroeconomics

13. Functions of Money
 Money Supply Measures
M2 = M1 + MMMFs + Short Term CDs + Small
Time Deposits
MMMF = money market mutual funds (a form of
savings).
CD = certificate of deposit (savings with a fixed
interest rate)
Small time deposits = money in small savings
accounts.
Macroeconomics

14. Functions of Money
 Money Supply Measures
M3 = M2 + Large Time Deposits + RPs +
Eurodollars + Institution held MMMFs
Large time deposits = money in large (corporate)
savings accounts.
RP = repurchase agreements (savings with
collateral in the form of bonds).
Eurodollars = dollar savings in foreign countries.
Macroeconomics

15. Functions of Money
 Money Supply Measures
For the latest money supply statistics, visit:
http://www.federalreserve.gov
Macroeconomics

16. Functions of Money
 The Federal Reserve System
The Federal Reserve System is the central
banking system of the United States.
It was created in 1913, and includes 12
central banks, a Federal Reserve Board,
various committees, and member banks.
Macroeconomics

17. Functions of Money
 The Federal Reserve System
The Federal Reserve acts independently from
Congress.
Macroeconomics
Federal Reserve
Building in Washington, D.C.
The Capitol in
Washington, D.C.

18. Functions of Money
 The Federal Reserve System
Federal Reserve Functions include:
 Control of the money supply
 Supervision of banks
 Check clearing
 Statistics gathering and research
Macroeconomics

19. Functions of Money
 The Fed and the Money Supply
The Fed controls the money supply
through
1. Open Market Operations
2. Reserve Requirement Policy
3. Discount Rate Policy
Macroeconomics