Chapter 14Money, Banking, and Central Banking.ppt

Introduction Learning Objectives Define the fundamental functions of money Identify key properties that any goods that function as money must possess Explain official definitions of the quantity of money in circulation Learning Objectives Understand why financial intermediaries such as banks exist Describe the basic structure of the Federal Reserve System Discuss the major functions of the Federal Reserve Chapter Outline The Functions of Money Liquidity Monetary Standards, or What Backs Money Defining Money Chapter Outline Financial Intermediation and Banks Banking Structures Throughout the World The Federal Reserve System Did You Know That... About 50 billion checks are written in the U.S. annually? The proportion of noncash payments accounted for by checks has been declining over the past 20 years? Money Money Any medium that people generally accept in exchange for goods and services Types of Money The Functions of Money The functions of money are: Medium of exchange Unit of accounting Store of value (purchasing power) Standard of deferred payment The Functions of Money Medium of Exchange Any asset that sellers will accept as payment Barter The direct exchange of goods and services for other goods and services without the use of money The Functions of Money Medium of exchange Money reduces transactions costs Means-of-payment uncertainty The Functions of Money Unit of Accounting A measure by which prices are expressed The common denominator of the price system A standard of value The Functions of Money Store of Value The ability to hold value over time Money allows you to transfer value (wealth) into the future The Functions of Money Standard of Deferred Payment A property of an asset that makes it desirable for use as a means of settling debts maturing in the future An essential property of money The Functions of Money Liquidity The degree to which an asset can be acquired or disposed of without much danger of any intervening loss in nominal value and with small