There are 6 points please answer each one. Please solve them in a short answer f
ID: 1175474 • Letter: T
Question
There are 6 points please answer each one. Please solve them in a short answer format. Thank you for your help! Topics 1-2: The Federal Reserve and Monetary Policy What is Money? Uses of Money Types of Money (bartering, commodity money, gold standard, fiat money, cryptocurrencies) Goals of Federal Reserves How Fed uses Monetary Policy to achieve its stated goals How Monetary Policy Tools (Open Market Operations, Discount Rate, Interest on Reserves, and Reserve Requirement) affect supply and demand in the "Market for Reserves (i.e. inter-bank lending). -Explanation / Answer
Q1) The medium of exchange by which goods and services get value is money. It is the way of meeting liability for payments. Examples are utility bill amount is paid through cash $2,000, asset purchased of $25,000, etc.
Q2) Money uses for making payments and keeping as savings. All the incomes are not spent at once; a portion of it is saved because of future uncertainties and creating of wealth.
Q3)
Bartering: This is the ancient system of exchanging goods and services in exchange of goods and services – suppose a bag of potato was sold in exchange of a cow. Introduction of money breaks this system.
Commodity money: It indicates the above bartering system, where a commodity becomes money; such as a bag of potato becomes money to get a cow, and vice versa. Here commodities become money.
Gold standard: In some countries (like India) the currency value depends on the value of gold. This system was abolished in the US in 1930, after the great depression.
Fiat money: It becomes legal tender in the US after the abolishing of gold standard. Such money is not backed by anything and examples are coins, bill of exchange, etc.
Cryptocurrency: This is digital and accepted throughout the world; examples are debit card, bitcoin, etc.
Q4) Fed wants to keep adequate money supply in the economy; this is the primary goal, since an economy depends on it. If there is excess money supply, inflation may creep up; if there is deficiency of money, economic growth may decline and unemployment may increase.
Q5) There are two policies: Expansionary and contractionary.
Expansionary monetary policy: This is the policy of government for increasing spending and/or decreasing interest rate to boost up the economy. GDP declines during the phase of recession. In order to boost up the economy, the expansionary monetary policy could be taken by the government. Under this policy the government spends more for economical development. More and more projects will develop, people get jobs, and earnings will increase. Such increase in output leads to increase in aggregate demand.
Contractionary monetary policy: This is just opposite of expansionary policy where government decreases spending and/or increases interest rate to minimize inflation.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.