• Explain the organization of the Federal Reserve System. • Explain reserve requ
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Question
• Explain the organization of the Federal Reserve System. • Explain reserve requirements. • Explain the three types of unemployment. • What is the difference between the nominal interest rate and the real interest rate? • What are the four functions of money? • What policy tools does the Fed use to control money supply? • Discuss the Fed's effectiveness in fighting inflation and recession. • What is hyperinflation and why is it acceptable under some circumstances? • Is "monopoly" a good name for the game "Monopoly"? What aspects of the game involve monopoly? Explain using the economic aspects, definition, and function of monopolies.
Explanation / Answer
Explain reserve requirements
reserve requirement is the minimum percentage of deposits that needs to be kept as reserved with central bank of a country. this reserves is kept to meet cash needs or funds needs at the time of emergency or contigency. This fund is kept in order to fund demand by the depsitors.
What are the four functions of money
1) Money is unit of account and each and every value is measured in terms of value
2) money act as medium of exchange
3) money acts as a store of value
4) money acts as a standard of deferred payment
What is the difference between the nominal interest rate and the real interest rate?
nominal interest rate is coupon rate of interest or rate of return which you get on investment whereas real interest rate is when nominal rate of interest is adjusted for inflation or price change.The real rate is the nominal rate minus inflation
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