Econ: Federal Reserve System Essays

Michaela Gradstein
Econ
Chapter 13

Section 1 review:

1. Medium of exchange - any item that sellers accept as payment for goods and services.
Standard of value - money provides people with a way to measure the relative value of goods and services by comparing their prices.
Store of value - money can be saved, or stored for later use.
Commodity money - an item that has a value of it’s own and that also is used as money.
Representative money - an item that has value because it can be exchanged for something else of value.
Specie - gold or silver.
Fiat money - has value because a government decree says it has value.
Currency - coins and paper bills that most countries in the world use as money.
Near money - financial assets that are similar to money, such as saving accounts.

2. Money serves as a medium of exchange, a standard of value, and a store of value.

3. Popcorn and oranges are perishable, so they would not be durable money. Oranges might be too heavy to be portable. None of these items can easily be divided. These items could also lose their value over time. Most importantly, people would not want to trade a bag of beads for a new sports car. These items are not acceptable.

4. Commodity money, representative money, and fiat money are sources of money’s value.

5. In the United States, money can come in the form of paper, coins, checks, and near money, such as saving accounts and time deposits.

6. If my class members used a different form of money, a different form of paper money would be effective. This way, the currency would be valid only within the school, yet it would be durable, portable, and accepted. 7. Mexico - Peso - 1 Mexican Peso equals 0.077 US Dollar
Pakistan - Rupee - 1 Pakistani rupee = .0093 US dollar.
Thailand - Baht - 1 Baht = .032 US dollar.
Germany - Euro - = 1.35 US dollar
Jamaica - Jamaican Dollar - = .0097 US dollar.

Section 2 review:

1. Gold Standard - a monetary system in which paper money and coins carry the value of a specified amount of gold.

2. The Federalist policies called for a national bank, tariffs, and good relations with Britain as expressed in the Jay Treaty negotiated in 1794. Their political opponents, the Democratic-Republicans, led by Thomas Jefferson and James Madison, denounced most of the Federalist policies, especially the bank.

3. As America's population and economy grew during the 17th, 18th, and 19th centuries so did America's need for fiscal maturity. Banking inevitably became a point of concern. Although America currently enjoys one of the most developed central banking systems in the world, the banking system developed after considerable trial and error -- and considerable debate.

4. Roosevelt’s election brought lasting changes to the monetary and banking systems. The government kept the nation’s banks closed for four days in March 1933. The banking act of 1933 separated investments from savings in order to protect deposits.

5. The turmoil of the civil war encouraged the development of a new national banking system due to large war debts and state printed currency that made commerce and trade difficult.

6. No country today still relies on the gold standard. Examples of commodities that have been used as mediums of exchange include gold, silver, copper, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, and barley.

Section 3 review:

1. Commercial bank - these banks lend money, accept deposits, and transfer money among businesses, other banks, and financial institutions, and individuals.
Savings and loan associations - these were established to lend money and accept deposits.
Mutual savings banks - these were set up to serve people who wished to make small deposits that large commercial banks did not want to handle.
Debit card - a buyer pays for goods at the checkout counter by inserting a plastic card.
Deregulation - the reduction

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