Chapter 14 - The federal reserve and monetary policy. This chapter presents the following content: The organization of the Federal Reserve System, reserve requirements, the deposit expansion multiplier, the tools of monetary policy, the feds effectiveness in fighting inflation and recession, the banking act of 1980. | Chapter 13 Money and Banking 13-1 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives 13-2 The four jobs of money What money is M1, M2, and M3 The demand for money Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives 13-3 The origins of banking The creation and destruction of money Branch banking and bank chartering The FDIC The savings and loan debacle Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 13-4 The Four Jobs of Money Medium of exchange Standard of value Store of value Standard of deferred payment Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Medium of Exchange The most important job of money is to serve as a medium of exchange When any good or service is purchased, people use money Money makes it easier to buy and sell because money is universally accepted Money, then, provides us with a shortcut in doing business By acting as a medium of exchange, money performs its most important function 13-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Standard of Value 13-6 Money is a common denominator in which the relative value of goods and services can be expressed A job that pays $2 an hour would be nearly impossible to fill, while one paying $50 an hour would be swamped with applications Does money work well as a standard of value? You tell me Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Store of Value 13-7 If you could buy 100 units of goods and services with $100 in 1982, how many units could you buy with $100 in 2000? Answer: you could have bought just 51 units During this period, inflation robbed the dollar of almost half of its purchasing power Over the long run, particularly since World War II, money has been a very poor store of value However, over relatively short periods of time, say, a few weeks or months, money does not lose much of its value Copyright 2002 by The . | Chapter 13 Money and Banking 13-1 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives 13-2 The four jobs of money What money is M1, M2, and M3 The demand for money Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives 13-3 The origins of banking The creation and destruction of money Branch banking and bank chartering The FDIC The savings and loan debacle Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 13-4 The Four Jobs of Money Medium of exchange Standard of value Store of value Standard of deferred payment Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Medium of Exchange The most important job of money is to serve as a medium of exchange When any good or service is purchased, people use money Money makes it easier to buy and sell because money is universally accepted Money, then, provides us with a shortcut in doing business By acting as a medium of exchange,
