Chapter 14 - Money, banking, and financial institutions. In this chapter, we start by looking at the functions of money and the definitions of the money supply. Then there is a discussion of the factors that back the money supply. In this chapter, you will be introduced to the . banking system, in particular, the Federal Reserve. You will learn about their functions and how the Fed has been set up. | Chapter 14 Money, Banking, and Financial Institutions McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved In this chapter, we start by looking at the functions of money and the definitions of the money supply. Then there is a discussion of the factors that back the money supply. In this chapter, you will be introduced to the . banking system, in particular, the Federal Reserve. You will learn about their functions and how the Fed has been set up. Then we will talk about the financial crisis of 2007–08 and how the financial system has changed as a result. 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 Liquid 14- Which function of money is considered the most important depends upon circumstances. In economics, we typically focus on money as a medium of exchange and a store of value. We use money as a unit of account in measuring GDP and other economic measures. As a medium of exchange, money allows an economy to function efficiently. Without it, trade would be difficult as each party would have to seek out someone else who has the desired product or service and then trade. If the party with the desired product does not want the good, there might have to be multiple exchanges in order to get the desired product. As a unit of account, money provides a consistent way to value business activity so comparisons can be made. As a store of value, money allows for a person to amass wealth without having to keep actual products that might not be possible to keep long term. Money Definition M1 M1 Currency Checkable deposits Institutions offering checkable deposits Commercial banks Savings and loan associations Mutual savings banks Credit unions 14- Note that checkable deposits include smaller components such as traveler’s checks. Currency includes coins and paper money. Currency is referred to as token money, which means . | Chapter 14 Money, Banking, and Financial Institutions McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved In this chapter, we start by looking at the functions of money and the definitions of the money supply. Then there is a discussion of the factors that back the money supply. In this chapter, you will be introduced to the . banking system, in particular, the Federal Reserve. You will learn about their functions and how the Fed has been set up. Then we will talk about the financial crisis of 2007–08 and how the financial system has changed as a result. 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 Liquid 14- Which function of money is considered the most important depends upon circumstances. In economics, we typically focus on money as a medium of exchange and a store of value. We use money as a unit of account in measuring GDP and .
