Question 1 The economists define money as something that serves as a medium of exchange, a unit of accounting, a standard for deferred payments, and a store of value. As a medium of exchange, money can be used as an intermediary for trade that helps remove the inefficiency of barter system…
Download file to see previous pages...
Further, economists use different level for recognizing money (like M0, M1 etc.). And economists define a money multiplier to see the ratio of money supply and the actual monetary base in the economy. Now, the recent financial crisis has affected some parts of the definition of money especially as a store of value. The financial upturn has shown that most assets and asset classes previously believed to be the “safe” stores of value for money are in fact all driven by risk and can at some point in time not be “so safe”. For example, houses are one the largest stores of value but the global deterioration of property prices has made this option less valuable. Similarly, government bonds which were considered as the safest bets for store of value were actually no longer safe either as we see the example of Greece and their impending default of payment and/or restructuring of debt in Greece. Bank deposits were badly hit as storage of value with the bank-runs seen in Northern Rock, UK and several other banks in the US. Currencies by nature of being subject to market demand and supply appreciate and depreciate with time and cannot be considered as safe stores of value either as was seen in the example of Asian financial crisis of the late 1990s. Secondly, the money multiplier, m, as explained by economists is supposed to be 1/R where R is the reserve requirement for banks. As seen during the financial crisis, this equation was not valid at all. Figure 1 below shows the variation of money multiplier from 1984 to present. We see that as soon as the financial crisis hit, even though there was little or no change in the reserve requirements, the money multiplier saw a huge drop to end up at less than 1.This means that while the government was creating supply of money, banks were reluctant to lend. Figure 1. M1 Money multiplier in the US – 1984 to March 2011 Source: Federal Reserve Bank of St. Louis Given the turnout of events as happened during the financial crisis, there seems to be no readily identifiable group of assets that economists would consider as money. To be accepted as money by all, none of the assets satisfy all the criteria – bill of exchange, bonds, equities, deposits. Gold, silver and precious metal come close but as these are rare, and cannot really meet the demand for money, they cannot really be considered as money. Question 2 The structure of Federal reserve system is shown below in figure 1. Figure 1. Structure of Federal reserve system The components of the federal reserve system and their functions are described below: 1. Board of governors: they are appointed by the US president and confirmed by the US senate. The primary responsibility of the Board members is the formulation of monetary policy. The Board sets reserve requirements and shares the responsibility with the Reserve Banks for discount rate policy. 2. Federal Reserve banks: The 12 Federal Reserve banks operate under supervision of the board of governors. Each bank has 9 directors who appoint the bank presidents who form part of the Federal Open Market Comittee. The main role of the reserve banks is to influence the flow of money and credit in the economy. The Federal Reserve Banks hold, in their vaults, collateral for government agencies to secure public funds that are on deposit with private depository institutions. The Federal Rese
...Download file to see next pagesRead More
Cite this document
(“Macro9C Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved from https://studentshare.org/physics/1425282-macro9c
(Macro9C Essay Example | Topics and Well Written Essays - 1000 Words)
“Macro9C Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/physics/1425282-macro9c.
Economic growth of a country can even occur with the increase in the key inputs of production mainly labor and capital, which helps in boosting up the productivity that result in the increase in the total production of the country.
Restaurants frequently offer kids free nights, and senior citizen discounts often get ‘Early bird specials.’ ‘Channel pricing’ is the practice of charging separate prices for an identical product, as determined by the channel through which it is sold.
Variation can be with respect to behaviour and appearance (Solomon, Berg & Martin, 2004). Inheritance - Some traits in organisms are passed on from parent to offspring while other traits are a result of environmental conditions. Heritability of traits influenced by external conditions is very weak.
Managing a nonprofit organization requires a proper blend of providing quality services and careful administration that can help in cost reduction. The management needs and requirements of different types of nonprofit organizations can differ depending upon their goals and objectives.
Through communication, we can understand people’s behaviors, cultures, and sociability. Good communication can improve our lives since we can build better relationships and better understanding. On the other hand, poor communication creates many adverse issues that may include broken and negative relationships, low productivity in companies, and world disintegration.
Bleeding Kansas and its impact on the Civil War
Bleeding Kansas was a relatively short-lived, yet bloody series of battles and oppositions that occurred in what had been the Kansas Territory (prior to being admitted to the Union) and neighboring Missouri (already a state in the Union).
The author says that the new married couples or the one who wants to enjoy their relationship frequent these village hotels. They are a source of primary income for the village hotels. They provide all facilities and offers discounts that make the hotel fares reasonable. Hawaiian hotels are very famous for couples.
Both books 'Monkey' and "Gulliver's Travels" are based on the theme of travel and real journey made by the protagonists. Using the theme of travel the authors help readers to comprehend the meaning of the stories comparing life with non-trodden paths, which the protagonists have to carve.
Table 1 shows the time taken for fitting and testing. The profit from the very low energy usage bulb is 5p, and 7p for the higher energy usage bulb.
d) The fitting machine and the shells are fully utilized i.e. not
It ranked in the top three in the “World’s Most Admired” survey. In addition, UPS designed a website devoted solely for the company’s diversity, environmental, education, and safety initiatives (Pasiuk, 2006, p. 141). The company is prominently known for its
hought as well as reflection relating to the reality within societal systems while also ensuring presenting solutions for the normative challenges affecting the society (Ferrari 43). Through ensuring provision of such solutions, the person manages to gain command or possess
2 Pages(500 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic Macro9C for FREE!