tailieunhanh - Lecture Economics (18th edition): Chapter 31 - McConnell, Brue, Flynn's

Chapter 31 - Money and banking. After reading this chapter, you should be able to: Identify and explain the functions of money and the components of the . money supply; describe what "backs" the money supply, making us willing to accept it as payment; discuss the makeup of the Federal Reserve and its relationship to banks and thrifts. | Money and Banking Chapter 31 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives The functions of money Components of the money supply What “backs” the money supply The Federal Reserve and the . banking system The functions and responsibilities of the Federal Reserve 31- Functions of Money Medium of exchange Used to buy/sell goods Unit of account Goods valued in dollars Store of value Hold some wealth in money form Money is liquid 31- Money Defined M1 Currency Checkable deposits Institutions offering checkable deposits Commercial banks Savings and loan associations Mutual savings banks Credit unions 31- Money Defined M2 M1 plus near-monies Savings deposits including money market deposit accounts (MMDA) Small time deposits Money market mutual funds (MMMF) 31- Money Defined M1 M2 56% 44% M1 18% Savings Deposits, Including Money Market Deposit Accounts Small Time Deposits Money Market Mutual Funds Held By Individuals Currency Checkable Deposits 16% 14% 52% $1,365 Billion $7,499 Billion January 2008 Totals + + + + + Source: Federal Reserve System 31- Money Supply Are credit cards money? What “backs” the money supply? Nothing! Why is money valuable? Acceptability Legal tender Relative scarcity 31- Money and Prices Prices affect purchasing power of money Hyperinflation renders money unacceptable Stabilizing money’s purchasing power Intelligent management of the money supply – monetary policy Appropriate fiscal policy 31- Federal Reserve System Historical background Board of Governors 12 Federal Reserve Banks Serve as the central bank Quasi-public banks Banker’s bank 31- Federal Reserve System Commercial Banks Thrift Institutions (Savings and Loan Associations, Mutual Savings Banks, Credit Unions) The Public (Households and Businesses) 12 Federal Reserve Banks Board of Governors Federal Open Market Committee 31- Federal Reserve System The 12 Federal Reserve Banks Source: . | Money and Banking Chapter 31 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives The functions of money Components of the money supply What “backs” the money supply The Federal Reserve and the . banking system The functions and responsibilities of the Federal Reserve 31- Functions of Money Medium of exchange Used to buy/sell goods Unit of account Goods valued in dollars Store of value Hold some wealth in money form Money is liquid 31- Money Defined M1 Currency Checkable deposits Institutions offering checkable deposits Commercial banks Savings and loan associations Mutual savings banks Credit unions 31- Money Defined M2 M1 plus near-monies Savings deposits including money market deposit accounts (MMDA) Small time deposits Money market mutual funds (MMMF) 31- Money Defined M1 M2 56% 44% M1 18% Savings Deposits, Including Money Market Deposit Accounts Small Time Deposits Money Market Mutual Funds Held By .