1. One of the functions of money is that it is a ‘store of value’. Explain 2. What is the difference between fiat money and a credit card? 3. How do commercial banks maximize their stockholders’ wealth? Macroeconomics7

  1. One of the functions of money is that it is a ‘store of value’. Explain

    How does fiat money differ from a credit card?

    3. How do commercial banks maximize their stockholders’ wealth?

    4. The Federal Reserve System, also known as the Fed (the Fed), is America’s central bank. Its primary tasks?

    5. Let’s say that the US is in a severe recession. The Fed could use the discount rate in order to stimulate the economy. Explain in detail.

    6. Let’s say that the US is in a severe recession. Which open-market operations could be used by the Fed to stimulate the economy (use lecture notes as a guide) Explain in detail.

    7. Using the explanation in the lecture, explain how the Fed’s purchase of bonds (securities) on the open market can not only increase the money supply through banks’ lending but also decrease the EFFECTIVE interest rate for borrowers. Give an example using actual interest rates.

    8. Your explanation of how the Fed uses the necessary reserve requirement to increase or decrease the money supply.

    9. Use the lecture’s formula to calculate the increase in money supply if $10 million is injected with a required reserve of 5%. A) Using the same data, calculate how much the money supply would decrease if $10,000,000 were removed from the money supply.

    10. These 3 events transformed a 1929 recession into the Great Depression

    11. Technology has made bartering more attractive, which was once a slow and inefficient method of exchanging value, in recent years. Identify four scenarios where modern-day bartering is beneficial for both parties.

    12. Let’s say you have 100 $1 bills. Let’s also assume that I have four $100 bills. Explain the reason why my four $100 bills are worth less than your 100 pieces of paper, even though they have more money.

    13. In effect, the Federal Reserve has the power to increase or decrease the amount of money available in the United States.

    a. Describe what the Fed should do in order to increase the money supply.

    b. Two reasons that the Fed would do it are listed below.

    14. Do you think it is possible that Fed could, although it acts independent of US government, use monetary policies to expand or contract the money supply in order not only to profit the wealthy corporations and individuals but also the less fortunate? Please explain your views here.

    15. Explain your opinion as to whether you feel that using a central bank (the Fed) to control all of the US’s major monetary policies as well as all of its money is dangerous? Is there any unintended consequence to giving so much power one private entity could have?





An asset that has a store of value can be used to purchase future goods and services at later dates. It is an asset that can be stored in a bank or kept at home. Money has a store value. It aids in future commerce and is therefore a vital money function. As a store-of-value, money in modern times serves the same purpose it served in the past. Today, people can purchase things with money they used to save in the bank. Any money asset that is used as currency must have money as its base. Money in the currency of a country must be recognized by all organizations and individuals. The currency should also be a place where value can be stored safely in order for the economy to work properly. Cont…



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