Lecture 14 the monetary system
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This document discusses the monetary system and the Federal Reserve. It defines money and its key functions as a medium of exchange, unit of account, and store of value. It describes different types of money like commodity and fiat money. It then explains the role of the Federal Reserve as the central bank of the US that regulates banks and controls the money supply through tools like setting interest rates and conducting open market operations. The Federal Reserve aims to balance economic growth and stability through its monetary policy decisions.
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Lecture 14 the monetary system
- 1. Macroeconomics Lecture 14 The Monetary System
- 2. Questions
- 3. How old to you have to be to be considered an adult for the purposes of calculating the unemployment rate? Are you included in the labor force? If 300 people are unemployed and the unemployment rate is 6%, how many people are employed? What percent of the U.S. population is 16 and older? What are the three categories that the Bureau of Labor Statistics (BLS) uses to classify adults? What is the labor force participation rate in the U.S.? How many adult Americans are not in the labor force? Who is responsible for measuring and reporting the unemployment rate in the U.S.? How many unemployment surveys does the BLS conduct each month? If I am unemployed and become a discouraged worker, what happens to the unemployment rate? What is the difference between the current population survey and the current employment statistics survey? Are you considered employed if you run your own business? If I work on my dad's farm during potato harvest, but am not paid, am I considered employed? If I have a job but am on vacation, am I considered employed? If I only work one hour a month, am I considered employed? If I have been looking for a job for more than 4 weeks, am I part of the labor force? I have not had a job in 10 years. Last week I started looking for a job. What category do I fall into? I am 15 and work for my dad. What category do I call into? 3,850 people are employed. The unemployment rate is 30%. How many people are in the labor force? Over the past 70 years has the labor force participation rate increased for decreased for women? 16 No 4,700 79% Employed, Unemployed, Not in the Labor Force 63% 94 million BLS 2 decrease households vs. business yes Yes Yes Yes Yes unemployed Not in Labor Force 3,850 ÷ .7 = 5,500 Increased
- 6. Functions of Money Medium of exchange Unit of account Store of value
- 7. Medium of Exchange Buyers give to sellers Sellers accept from buyers
- 9. Store ofValue Trading time for time Today for tomorrow Tomorrow for today Earn - Save - Spend
- 10. Liquidity How easy is it to convert something to money
- 13. Easy to carry Easy to measure Easy to verify Hard to copy
- 14. = Gold Standard Central Bank will convert paper money to gold at a fixed rate
- 15. Fiat Money No intrinsic value Declared money by government decree
- 16. Fiat Money Why do people accept fiat money? Trust that someone else will also accept it
- 17. Money Trust inscribed If people lose trust, money loses it value
- 19. Card Type Payment Credit Defer Debit Instant
- 20. Why credit and debit cards are not money Not a method of payment, but a method of making payment
- 21. Debit card is like a check Takes money out of your bank account
- 22. Credit Card Defer the payment
- 23. Demand Deposits Bank account that you can access by writing a check or using a debit card
- 24. Central Bank The bank that oversees the banking system and regulates the money supply in a country
- 25. Central Bank Every country has a central bank
- 27. Federal Reserve Bank The Central Bank of the U.S. FED federalreserve.gov
- 28. Federal Reserve Bank 1913 seven board members nominated and confirmed 14 year term
- 29. Chairman 4 year term most important
- 31. Federal Reserve Bank regulate banks control money supply
- 32. 12 regional banks 25 branch offices
- 34. Fed Functions • Issues national currency • Clearing of checks • The bank of banks - lender of last resort
- 35. Federal Open Market Committee FMOC 7 board governors 12 regional banks 5 of the regionals vote always NY Fed
- 36. Money Supply The quantity of money available in a country.
- 37. Monetary Policy Setting the money supply by the central bank policymakers