...Federal Reserve Paper Federal Reserve Paper Eco/212 Professor Sharma Kareisha Hawkins October 7, 2010 In this paper I will define the purpose and function of money. I will explain how the Federal Reserve’s manages the monetary system of the United States of America. In this paper I will also talk about the stated direction of recent monetary monetary policy in our nation. I will also explain what the effects of monetary policy are on production and employment in the economy. In defining the purpose of money, one must simply define money’s function. Money has many purposes but one purpose of money is that it has a standard exchange. It has a unit of account and a store value. “A medium of exchange is an item that buyers give to sellers when they produce goods and services. (Mankiw 2007) An example of this is if a person goes to Mr.T’s bar-b-que, that person pays Mr.T for the bar-b-que they just ate. Money as a unit of account is a measurement used to understand the value of a good or service or debt. For example if a candy bar costs $1 and a TV costs $300, then the TV might be worth 300 candy bars, but it is measured in money. Money as “a store of value is an item that people can use to transfer purchasing power from the present to the future.” (Mankiw) Federal Reserve is the central bank of the United States of America. The Federal Reserve Bank was created in 1913 to supervise our nation’s bank and to control the money supply of the...
Words: 661 - Pages: 3
...The Federal Reserve Gabe Gambrell ECO/212 December, 18, 2010 The Federal Reserve The object of money is used as a form of payment around the globe. The major functions of money are store of value, unit of account, and medium of exchange. Money is an economic resource that enables one to obtain value and use as a function of exchange for a need or desire in the form of goods and services. Unit of account is the unit measurement in exchange for a service or good. And store value of money is saving, retrieving, and how money’s value is affected during inflation. America’s economy functions on fiat money. Fiat money is defined as paper currency made legal tender by a fiat of the government, but not based on or convertible into coin (Hubbard & O'Brien, 2010). In the following paper I will discuss the Federal Reserve (Fed), monetary policy, and the economy’s production and employment. The central bank of the United States is another name for the Federal Reserve System. The Federal Reserve System is necessary in order to control the economy. Without the Fed the United States economy would be unstable. The Fed helps with price stability, high employment, economic growth, and stability of financial markets and institutions. The Fed can change the interest rates on the money it lends to banks. A higher interest rate makes money more expensive, thus discouraging banks to lend. Lowering interest rates causes the opposite effect. The second tool the Fed has is the power...
Words: 818 - Pages: 4
...Federal Reserve Paper University of Phoenix Dianne Fishel ECO/212 06/08/09 Federal Reserve Monetary policy is the process by which our government governs the money supply to achieve certain goals that helps the economic growth in the environment. Throughout the years the monetary policy was inspired by an economic theory known as monetarism. According to Merriam-Webster online dictionary monetarism is “the theory in economics that stable economic growth can be assured only by control of the rate of increase of the money supply to match the capacity for growth of real productivity” (2009). The Monetary policy is made by the Federal Open Market Committee also known as (FOMC), which has members of Board of Governors of the Federal Reserve System and five Reserve Bank presidents. According to Principle of Economics money functions “are the set of assets in an economy that people regularly use to buy goods and services from other people” (2007). Money can consist of the cash and checks in the economy. The purpose of money is used as a method of payment for goods, services, work and repayment towards a debt. However, the main use is for a medium of exchange, a unit of accounts and a store of value. Medium of exchange is the liaison used to buy and sell any kind of products for it to be truly marketable. There should be certain characteristics that it should possess such as transportability, recognizability, and resistance to counterfeiting. Paper money...
Words: 811 - Pages: 4
...Federal Reserve Paper Joshua R. Willis October 19, 2011 ECO/212 Bhaskar Singh Federal Reserve Paper Money, the main topic of the majority of discussions, debates, and arguments in the United States today. These days it seems people in the United States are more focused on who has too much money and who does not have enough. Granted money is required for just about everything these days. It is hard to believe that at times in our country’s history money was not used. At those times people used to trade goods with each other to receive the goods or services they needed. This raises an in interesting question, why is money so important and necessary? Therefore, this paper will look at the purpose and functions of money, how the central bank manages a nation’s monetary system, the direction of monetary policy in the United States, and the effects of monetary policies. “Money is defined as assets that people are generally willing to accept in exchange for goods and services or for payment of debts” (text). Therefore, the main purpose of money is to be a medium of exchange. This also falls in line with the four functions of money, which are medium of exchange, unit of account, store of value, and standard of deferred payment. Medium of exchange refers to the ability to purchase goods or services with money and also to accept money in return for those goods and services. The value in terms of money given to those goods and services is the unit of account. Because not all...
Words: 829 - Pages: 4
...Federal Reserve Paper Jess Marie Sotto ECO/212 December 11, 2011 Kalamogo Coulibaly Federal Reserve Paper The Federal Reserve is an important component of the nation’s financial system. The fed also known as the central bank make crucial decisions to ensure that the country’s macroeconomic policy objectives are met. The fed handles financial topics such as government spending, taxes, interest rates and money. The following is a discussion of the purpose and function of money, monetary system, and current policy actions. The Purpose and Function of Money Money functions as a medium of exchange, a unit of account, store of value, and a standard of deferred payment. Medium of exchange means that sellers will sell goods or services to people if they are willing to accept money in return. Money also functions as a unit of account which means that it is used to measure the value of the economy. Money as store of value means that because of money's liquidity, it is easier to save it for future use in comparison to other assets. Money as a standard of deferred payment means that money can be used in borrowing and lending such as credit cards, loans etcetera (Hubbard & O'Brien, 2010, p. 827). The Nation’s Monetary System The nation’s central bank also know as the Federal Reseve manages the nation’s monetary system through the implementation of financial policies (Hubbard & O'Brien, 2010, p. 790). Monetary policies are action’s the Federal Reserve...
Words: 807 - Pages: 4
...Federal Reserve Paper Kandy Laux July 28, 2011 ECO/212 Jumoke Sanusi, PhD After reading the “Monetary Policy Report to the Congress” reported by the website Federal Reserve.com (2011). This student is almost more confused presently than ever. The facts and figures are difficult to wade through, but this student will give it a try. The purpose and function of money in today’s world market are still assets in which citizen’s exchange for goods and services received or for paying one’s creditors. Revenue (cash) is utilize in implemented to do four operations, which is store accounts, medium exchange, unit of account, and standard of deferred payments. Store accounts basically are revenue is allowing to be saved. Revenue is a standstill just sitting, not going anywhere. Medium exchange is revenue is in action and obtains an exchange value for goods and services. Unit of account is revenue is exchanged for goods and services, which have not a set price. Standard of deferred payment is a mixture of the other three uses of revenue. These four functions of money are consistently increasing and decreasing by the United States central banking system. The banking system that is used by the United States is called the central bank controlled via the Federal Reserve Bank. The Federal Reserve Bank is regularly checks out the economic health of the United States to maintain the monetary police to help it become steadfast. The Federal Reserve three tools of monetary...
Words: 849 - Pages: 4
...The Federal Reserve Denise Hammer ECO/212 July 11, 2011 Professor Hulya Arik The Federal Reserve Money was invented to expedite the exchange of values from person to person. It began through a barter system. That is, people would trade one thing for another. For example, Bill has a cow Bob wants. Bob has 10 extra bushels of wheat. Bill needs the wheat so his wife can make bread. Bill will accept the 10 bushels of wheat for the cow. However, barter is limited. In order for a barter to work, “each person must want what the other one has” (Hubbard & O’Brien, 2010). For a government to be more efficient, the medium of exchange must be one thing that is recognized by everyone. That is why paper is used for money in today’s society. Paper money has specific values so it is easier to determine what a person can get with the value of their paper. Four functions must be satisfied for anything to be used as money. The first function is medium of exchange. The seller must be willing to accept what is offered in exchange for his goods or services. A medium of exchange allows a seller to sell his or her goods or services for money and use that money to buy whatever he or she desires. The second function is a unit of account. A unit of account is a way of determining the value of the money. With barter, one item could be worth many prices. A plow could be worth a cow, 20 ears of corn, or a horse. When a single good is used for the first time as money, the item no longer has several...
Words: 1199 - Pages: 5
...Federal Reserve Paper Eco 212 August 22, 2010 Federal Reserve Paper The Federal Reserve System (Feds) in the Central Bank, essentially it is a bank’s bank. Its main function is to implement policies to control the nation’s money supply. Because of the economic recession, the Feds reacted with the expansionary monetary policy. Expansionary monetary policy is the Feds increases the money supply. The current year’s effects of expansionary monetary policy are documented by the Federal Reserve Board of Governors within the Monetary Policy report to Congress. Also, if the economy were in an inflationary gap then the Feds would react with contractionary monetary policy. Contractionary monetary policy is the Feds decreases the money supply (Arnold, 2005 pg 242). Money is defined as any good that is widely accepted for purposes of exchange (payment for goods or services) and in the repayment of debts. Money has three functions. Its functions are: 1) Medium of exchange. 2) Unit of account. 3) Store of value. Medium of Exchange is anything that generally acceptable in exchange for goods and services. Unit of Account is a common measure in which relative values are expressed. Store of Value is the ability of an item to hold value overtime a function of money. In addition, with out money, the nation will still be using the barter system. This is an exchange of goods and services for other goods and services. Money has value because of its general acceptability (Arnold, 2005 pg 307)...
Words: 875 - Pages: 4
...Federal Reserve Paper Andy Martinez ECO/212 April 23, 2011 Boris Higgins Abstract * In this paper I will describe the purpose and function of money. It will show how the central bank manages a nation’s monetary system. Outline the stated direction of recent monetary policy in the United States, and last but not least, list one policy action that the Federal Reserve has taken to confirm that direction and the effects of monetary policies on the economy’s production and employment. * * * Money is limited by the central bank, and they decide the rate of the US dollar. Money is defined as the resources that individuals are normally ready to accept in the trade of goods and services or for disbursement of debts. The nation’s central bank also known as the Federal Reserve Bank and diverse tools are used to run and manage the financial policy. For this is the job of the Federal Reserve Bank. The Federal Reserve Bank is constantly evaluating the monetary solidity and building mandatory changes to the monetary policy in an effort to alleviate the economic vigor. Money was commonly formed to reinstate the barter system and is used consistently in the world’s economy in trade of goods and services. Money is used to achieve four functions that are medium of exchange, unit of account, store of value, and standard of deferred payment. Medium of exchange is activated when sellers are ready to acknowledge items in trade of goods or...
Words: 838 - Pages: 4
...Measuring Economic Health Paper ECO/212 January 24, 2011 Nelson Lima Measuring Economic Health Paper It is important to take a look at the trend of the Gross Domestic Product when determining whether the economy is healthy or not. Production and employment rates can also help determine whether the economy is healthy. Understanding how fiscal policies tie in with these can also help determine the health of the economy. This paper will describe how the Gross Domestic Product is used to measure the business cycle. Also this paper will describe the roles of the government concerning fiscal policies. Finally, this paper will explain the effects of fiscal policies on the economy’s production and employment. GDP and the Business Cycle Economic growth is not a steady event. It tends to exhibit a pattern. There is first an expansion of above-average growth. Then there is a peak. Next there is a contraction of below-average growth. Finally, there is a low-point. The low-points are generally followed by periods of expansion. Then the cycle repeats itself. Although the cycle repeats, it does not repeat in a regular manner. These fluctuations in economic growth are known as the business cycle. Because the business cycle is related to economic activity, the Gross Domestic Product (GDP) is a strong indicator of economic contractions. “GDP is a monetary measure of the economy’s production, valued using the prices from a selected base year” (Rummery, PhD, 2002). The health...
Words: 799 - Pages: 4
...The Federal Reserve Tanya Stone ECO/212 December 5, 2011 Rina Bills The Federal Reserve The Federal Reserve is the part of the government that is responsible for making decisions on the monetary policy. They also print currency and manufacture coins. This paper will address what money is and the purpose of it. It will also address the Federal Reserve’s monetary policy and its’ effect on production and employment. Money, also known as currency or coin, is used to pay for goods and services. It is necessary in order pay for importing goods to our country. It is also used for purchases such as vehicles, homes, goods, services, labor, and raw materials. It is meant to facilitate trade among countries (The Purpose and Function of Money). The Federal Reserve, also known as the Fed, is the central bank of the United States. It is responsible for managing the nation’s money and credit. It supplies businesses with currency, coins and services for payments from EFT’s (Electronic Funds Transfers) to check-clearing. They are responsible for providing financial services to the United States Treasury, supervising and regulating the banking and financial systems, and overseeing consumer banking protection laws (About the Fed, 2011). According to the Joint Economic Committee Study of October 2000, “Price stability is currently the central focus of the U.S. monetary policy (Saxton, 2000).” There is no agreement, as of 2000, between economists and the Federal Reserve ‘s policy to set...
Words: 909 - Pages: 4
...Federal Reserve Paper Angelika Edwards ECO/212 Principles of Economics March 14, 2012 Dr. Harjanto Djunaidi Federal Reserve Paper The intention of this Federal Reserve term paper is to outline the reason and meaning of money as well as clarify exactly how the Federal Reserve applies monetary policies towards retaining the economic balances. The intent of money, whether it is currencies, credit cards, demand deposits, and revenues of exchange in which we use to purchase merchandises. It is an instrument received in exchange for profit and is an acknowledged statistic that all nationalities agree to take it. Currency includes three roles in the financial system: 1. Medium of Exchange – a worldwide utensil that consents of consumers as well as traders to money trade in a transaction designed for services and goods. 2. Unit of Account – Money also functions by means of a unit of account, providing a frequent quantity of the value of products and services exchanged. Calculating the value or price of a good, in terms of money, enables both the merchant and the buyer to render decisions about how much of the good to supply and how much of the good to purchase. 3. Store of Value – product, exchange, forms of resources that are tradable and stored for imminent use. It is a basic module of the monetary system as it allows exchange to transpire with substances that have inherited profit. An example of store of value is currency. If the worth of currency becomes irregular...
Words: 1389 - Pages: 6
...Money, Purpose and Function Antonio Carter ECO 212 January 31, 2011 Dr. Sam Hancock Money, Purpose and Function In this paper, Team C will explain the purpose and function of money. Money is considered to be a heavily thought about issue. The religious people say “money” is the route of all evil. The rich lose their minds when they lose their money. The poor people spend money on lotteries and gambling in the attempt to become rich. The few people who win the ‘Big Payoff’, and they are few and between, are soon poor again because they do not know or understand how to handle money and make the money work for them. The definition of money is described by how people are commonly keen to accept as a reward for services produced or compensation of services owned (Hubbard & O'Brien, 2010). Assets are commonly defined as important possessions owned by a person or a firm (Hubbard & O'Brien, 2010). If 100 different people are asked what is the purpose or function of money, the result would receive at a minimum 50 different answers. It perceived in many situations how some people will use money to manipulate people and situations in their favor. Some people have just enough money to live on until the next paycheck arrives, and some have just about enough to juggle and pay their bills bi-monthly. Reported instances were published describing people who must have the best everything. The best cars, Cadillac Escalades, Mercedes; the name brand clothes and purses, Doonie...
Words: 1083 - Pages: 5
...U.S Federal Reserve Monetary Policy Sherwin Harris ECO/212 May 30, 2011 Frank Vigil Introduction The Monetary Policy relates to the activities that the Federal Reserve take on to effect the sum of money and credit in the U.S. economy. Changes to the amount of money and credit have emotional impacts on the interests rates and the performance of the U.S. economy, if the cost of credit is reduced, more people and business will borrow money and the economy will accelerate. Money The purpose and function of money can be considered a medium of exchange. Is a standard representation of value, and can be used as a payment for products, service of goods or as a measure of wealth. The assessment of money are regulated by government agencies, gold, and most market conditions, The central bank manages the nation's monetary system by increasing or decreasing the monetary supply which in good common spirit can enhance increase or downcast the affect of interest rates, and control the rate in which goods and services increase in appraisal in relation to one another. Money is not just resources of exchange; it is also a store of value for an individual, family or a society. In its modest form, money could be, and was at times, coin or pieces of paper that represented real things. Gold has been used as the backing for many currencies in most countries, the of meaning money that has no commodities or other valuables directly backing it, is often said...
Words: 1040 - Pages: 5
...* Federal Reserve Paper * Stephanie León-Rivera Principles of Economics ECO/212 University of Phoenix Prof. Carlos Méndez-David, Sr. 15 de mayo de 2010 Federal Reserve Paper “El capital no es un mal en sí mismo. El mal radica en su mal uso.” –Mahatma Gandhi. A través de este escrito se pretende analizar varios conceptos directamente relacionado a la economía, entre estos podríamos indicar el más importante relacionado a el propósito y función del dinero. En adición, se revisará sobre la institución principal, la Reserva Federal, la cual administra el sistema y políticas monetarias en los Estados Unidos y sus territorios. Propósito y Funciones del Dinero Formalmente, es conocido el Dinero como un conjunto de activos en una economía regularmente utilizado para adquirir bienes y solicitar servicios entre las personas (Mankiw, 2007). El Dinero compone varias funciones en la economía, entre estas: Medio de Cambio, éste es aceptado a cambio de bienes y servicios, en segunda función la Unidad de Cuenta, medida para expresar el precio de los bienes y servicios, tercera función Deposito de Valor, éste puede conservarse e intercambiarse más adelante. Cualquier artículo en el mercado tiene un valor y éste es reflejado en cantidad monetaria, es decir su precio, con el propósito de cuantificar los productos o diversidades en general. Los economistas utilizan el término Liquidez, para describir la facilidad con la que un activo puede convertirse en medio de intercambio...
Words: 1067 - Pages: 5
