...Running head: Federal Reserve Paper 1 Federal Reserve Paper Economics/212 Melody Ramos University of Phoenix Robert C. Paramo, MBA February 28, 2011 Assignment paper 2 Purpose of Function of Money Money was invented to facilitate the exchange of values between individuals, any medium of exchange that is widely accepted in payment for goods and services and of the settlement of goods, Barter- to trade by exchanging one commodity for another (Webster.com). Money is used as a standard value for measuring the relative worth of different goods and services. These basic trading of things and services are limited money helps to facilitate trade so that both sides can benefit from trade. The mean reason why money is made is to make life better, in case that fails then it is being used incorrectly. This can be true for an individual perspective or as a society. In either case the function of money does require a little faith in its value. A government has the ability to destroy the value if it prints to much money then it interferes with proper functioning. By determining what prices should be paid for things instead of letting participants decide in any exchange also known as the market, this will also interfere with the function of money. Ultimately this will have a bad impact on the soul purpose of money. Central Bank, Monetary System & Policy Production The Fed is the central bank of the United States, Congress created the...
Words: 1058 - Pages: 5
...Federal Reserve Paper Kandy Laux July 28, 2011 ECO/212 Jumoke Sanusi, PhD After reading the “Monetary Policy Report to the Congress” reported by the website Federal Reserve.com (2011). This student is almost more confused presently than ever. The facts and figures are difficult to wade through, but this student will give it a try. The purpose and function of money in today’s world market are still assets in which citizen’s exchange for goods and services received or for paying one’s creditors. Revenue (cash) is utilize in implemented to do four operations, which is store accounts, medium exchange, unit of account, and standard of deferred payments. Store accounts basically are revenue is allowing to be saved. Revenue is a standstill just sitting, not going anywhere. Medium exchange is revenue is in action and obtains an exchange value for goods and services. Unit of account is revenue is exchanged for goods and services, which have not a set price. Standard of deferred payment is a mixture of the other three uses of revenue. These four functions of money are consistently increasing and decreasing by the United States central banking system. The banking system that is used by the United States is called the central bank controlled via the Federal Reserve Bank. The Federal Reserve Bank is regularly checks out the economic health of the United States to maintain the monetary police to help it become steadfast. The Federal Reserve three tools of monetary...
Words: 849 - Pages: 4
...Running head: FEDERAL RESERVE PAPER The Federal Reserve is an institution that makes many decisions that affect the American economy. The purpose and function of money will be explained within this paper. This paper will explain how the central bank manages the nation’s monetary system and outline the stated direction of recent monetary policy. The latest action by the Federal Reserve to confirm this direction will be explained. This paper will explain the effects of monetary policies on the economy’s production and employment. Purpose and Function of Money The purpose or function of money is to make an artificial value as a medium used to receive compensation for a service or good. Money makes trade easier between people, businesses and countries. If there was no money, than how would wages be paid to people who produce goods? And how would goods or services be paid for by these people to support them? Typically the value of money can be set by government forces, gold, or market conditions. Management of a Nation’s Monetary System The central bank manages the nation's monetary system by either increasing or decreasing the monetary supply which can increase or slow down inflation, affect interest rates and control the rate in which goods and services increase in relation to one another. The central bank’s main job is to make sure the national currency and monetary supply remain stable. “The Federal Reserve is considered an independent central...
Words: 820 - Pages: 4
...Federal Reserve Paper University of Phoenix Dianne Fishel ECO/212 06/08/09 Federal Reserve Monetary policy is the process by which our government governs the money supply to achieve certain goals that helps the economic growth in the environment. Throughout the years the monetary policy was inspired by an economic theory known as monetarism. According to Merriam-Webster online dictionary monetarism is “the theory in economics that stable economic growth can be assured only by control of the rate of increase of the money supply to match the capacity for growth of real productivity” (2009). The Monetary policy is made by the Federal Open Market Committee also known as (FOMC), which has members of Board of Governors of the Federal Reserve System and five Reserve Bank presidents. According to Principle of Economics money functions “are the set of assets in an economy that people regularly use to buy goods and services from other people” (2007). Money can consist of the cash and checks in the economy. The purpose of money is used as a method of payment for goods, services, work and repayment towards a debt. However, the main use is for a medium of exchange, a unit of accounts and a store of value. Medium of exchange is the liaison used to buy and sell any kind of products for it to be truly marketable. There should be certain characteristics that it should possess such as transportability, recognizability, and resistance to counterfeiting. Paper money...
Words: 811 - Pages: 4
...Federal Reserve paper Julio L. Aguilera ECO/372 October 17, 2012 Charles Meyers Federal Reserve paper The author of this paper will be providing you the reader with information on the United States Federal Reserve so that you have a better understanding of it and how they operate. With the information provided from the author’s research hopefully you the official will make the decision of doing business with United States Federal Reserve system after you read this paper. This paper will cover the following: what are the factors that would influence the Federal Reserve and adjusting the discount rate, how the federal funds rate affect the decisions of banks in setting their specific interest-rate, how monetary policy aims to avoid inflation and control money supply, and last but not least what indicators are evident that there is too much or too little money within the economy and how monetary policy is aiming to adjust this problem. The Federal Reserve System is the United States Central banking system which was created on December 23, 1913. Federal Reserve System was created due to financial turmoil that was occurring in early 1900's. One example of financial turmoil the nation experienced was the Great Depression which resulted in the Federal Reserve making changes to their system. The members of the Board of Governors are nominated by the President of the United States and confirmed by the U.S. Senate. By law, the appointments must yield a "fair representation...
Words: 857 - Pages: 4
...Federal Reserve Paper Federal Reserve Paper Eco/212 Professor Sharma Kareisha Hawkins October 7, 2010 In this paper I will define the purpose and function of money. I will explain how the Federal Reserve’s manages the monetary system of the United States of America. In this paper I will also talk about the stated direction of recent monetary monetary policy in our nation. I will also explain what the effects of monetary policy are on production and employment in the economy. In defining the purpose of money, one must simply define money’s function. Money has many purposes but one purpose of money is that it has a standard exchange. It has a unit of account and a store value. “A medium of exchange is an item that buyers give to sellers when they produce goods and services. (Mankiw 2007) An example of this is if a person goes to Mr.T’s bar-b-que, that person pays Mr.T for the bar-b-que they just ate. Money as a unit of account is a measurement used to understand the value of a good or service or debt. For example if a candy bar costs $1 and a TV costs $300, then the TV might be worth 300 candy bars, but it is measured in money. Money as “a store of value is an item that people can use to transfer purchasing power from the present to the future.” (Mankiw) Federal Reserve is the central bank of the United States of America. The Federal Reserve Bank was created in 1913 to supervise our nation’s bank and to control the money supply of the...
Words: 661 - Pages: 3
...Federal Reserve Paper Andy Martinez ECO/212 April 23, 2011 Boris Higgins Abstract * In this paper I will describe the purpose and function of money. It will show how the central bank manages a nation’s monetary system. Outline the stated direction of recent monetary policy in the United States, and last but not least, list one policy action that the Federal Reserve has taken to confirm that direction and the effects of monetary policies on the economy’s production and employment. * * * Money is limited by the central bank, and they decide the rate of the US dollar. Money is defined as the resources that individuals are normally ready to accept in the trade of goods and services or for disbursement of debts. The nation’s central bank also known as the Federal Reserve Bank and diverse tools are used to run and manage the financial policy. For this is the job of the Federal Reserve Bank. The Federal Reserve Bank is constantly evaluating the monetary solidity and building mandatory changes to the monetary policy in an effort to alleviate the economic vigor. Money was commonly formed to reinstate the barter system and is used consistently in the world’s economy in trade of goods and services. Money is used to achieve four functions that are medium of exchange, unit of account, store of value, and standard of deferred payment. Medium of exchange is activated when sellers are ready to acknowledge items in trade of goods or...
Words: 838 - Pages: 4
...Running Head: Federal Reserve Paper Page 1 Federal Reserve Paper Your Name February 7, 2011 Federal Reserve Paper Page 2 Money has many purposes and functions. In economics money is defined as a set of assets in the economy that people use to buy goods and services from others. The intentions of the monetary systems are to put more money in the economy’s circulation to increase production and employment. Money has three main functions in the economy. It is the medium of exchange, a unit of account, and a store of value. When money is used to intermediate the exchange of goods and services it performs the function of being a medium of exchange. A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions. Money must be able to be saved, stored, and retrieved in order to be a store of value. Basically, money refers to any financial instrument that can fulfill the functions of money supply. The United States monetary system is managed by a central bank; in this case it is the Federal Reserve. The Federal Reserve manages our nation’s supply of money and credit. The Federal Reserve is at the center of our nation’s financial system. It provides money to the federal government...
Words: 798 - Pages: 4
...Federal Reserve Paper Introduction This paper will give definition to the purpose and function of money. It will explain how the Federal Reserve manages the monetary system of the United States. This paper will also outline the stated direction of recent monetary policy in this nation. It will list at least one policy action taken by the Federal Reserve confirming that direction. And, this paper will give explanation to the effects of monetary policies on production and employment within the economy. a. Define the purpose and function of money. In defining the purpose of money, one must simply define its functions. There are three functions of money. First of all, money is a medium of exchange. It is also a unit of account, and a store of value. “A medium of exchange is an item that buyers give to sellers when they purchase goods and services.” (Mankiw, 2007, p. 643) For example, when a person goes to Joe’s Diner for a hamburger and shake, he pays Joe with money for the meal he just ate. Money as a unit of account is a measurement used to understand the value of a good or service or a debt. For instance, if a Pepsi costs $1 and a television costs $200, the TV may be worth 200 Pepsis, but it is measured in dollars. Money as “a store of value is an item that people can use to transfer purchasing power from the present to the future.” (Mankiw, p. 643) When a person buys gasoline today, the store owner can hold that money to purchase a new putter next week. ...
Words: 836 - Pages: 4
...Federal Reserve Paper Joshua R. Willis October 19, 2011 ECO/212 Bhaskar Singh Federal Reserve Paper Money, the main topic of the majority of discussions, debates, and arguments in the United States today. These days it seems people in the United States are more focused on who has too much money and who does not have enough. Granted money is required for just about everything these days. It is hard to believe that at times in our country’s history money was not used. At those times people used to trade goods with each other to receive the goods or services they needed. This raises an in interesting question, why is money so important and necessary? Therefore, this paper will look at the purpose and functions of money, how the central bank manages a nation’s monetary system, the direction of monetary policy in the United States, and the effects of monetary policies. “Money is defined as assets that people are generally willing to accept in exchange for goods and services or for payment of debts” (text). Therefore, the main purpose of money is to be a medium of exchange. This also falls in line with the four functions of money, which are medium of exchange, unit of account, store of value, and standard of deferred payment. Medium of exchange refers to the ability to purchase goods or services with money and also to accept money in return for those goods and services. The value in terms of money given to those goods and services is the unit of account. Because not all...
Words: 829 - Pages: 4
...Federal Reserve Paper Nicole Gamsby Nima Rasakhoo November 29, 2010 Introduction Money is a hot topic within the majority of households in the United States. Money is something we all need to pay bills, buy groceries, and to purchase entertainment items such as video games or movies. It is also something we need to make larger purchases such as a car or a new home. Not many of us think about the uses or functions of money, we just know that we need money to obtain the things that we want. This paper will discuss the purpose and functions of money, how the Federal Bank manages the United States monetary system, outline the stated direction of recent monetary policies within the U.S. listing at least one policy action that the Federal Reserve has taken to confirm that direction, and explain the effects of monetary policies on the economy’s production and employment (just answer). The purpose and functions of money The purpose of money is to be used to buy the goods and services consumers need (O'Brien, 2010). Money has four functions: a medium of exchange, a unit of account, a store of value, and a method of deferred payment (O'Brien, 2010) (ivythesis). As a medium of exchange, money is accepted by a seller, such as the cashier at your local Wal-Mart, in return for products, such as a bottle of laundry detergent (O'Brien, 2010). As a unit of account, money is used to determine the value of goods and services within the economy (O'Brien, 2010). A bottle of Tide laundry...
Words: 1309 - Pages: 6
...Federal Reserve Paper The word Money is defined as any asset that can be easily used to purchase goods and services. The word Money is used in the terms of wealth. It is a word used to describe how much a person has or their financial worth. Money was invented to replace the barter system. The barter system is described as two people trading goods or services that will benefit the other. This system was useful for many centuries but people began to find it hard to benefit from this system over time. Money was then invented and it allowed people to trade money for goods and services. Legal tender convenient, easy to carry, easy to save and it could be passed on to many people for many different reasons. Today money is used in almost every aspect of the world and its economy. The Central Bank is an institution that oversees and regulates the banking system and controls the monetary base. It has exclusive privileges to lend its government money. The Central Bank controls the interest rates in the lending market and it borrowers. The Central bank is different from a Commercial Bank because it has the monopoly of creating money for its nation’s currency. The money is then lent to the government for legal tender. The main function is to control the nation’s money supply and they are considered to be the last resort to lend money to other Commercial Banks in the time of a crisis. The Central Bank is also in place to make sure Commercial Banks don’t have any fraudulent activity...
Words: 898 - Pages: 4
...Federal Reserve Paper Angelika Edwards ECO/212 Principles of Economics March 14, 2012 Dr. Harjanto Djunaidi Federal Reserve Paper The intention of this Federal Reserve term paper is to outline the reason and meaning of money as well as clarify exactly how the Federal Reserve applies monetary policies towards retaining the economic balances. The intent of money, whether it is currencies, credit cards, demand deposits, and revenues of exchange in which we use to purchase merchandises. It is an instrument received in exchange for profit and is an acknowledged statistic that all nationalities agree to take it. Currency includes three roles in the financial system: 1. Medium of Exchange – a worldwide utensil that consents of consumers as well as traders to money trade in a transaction designed for services and goods. 2. Unit of Account – Money also functions by means of a unit of account, providing a frequent quantity of the value of products and services exchanged. Calculating the value or price of a good, in terms of money, enables both the merchant and the buyer to render decisions about how much of the good to supply and how much of the good to purchase. 3. Store of Value – product, exchange, forms of resources that are tradable and stored for imminent use. It is a basic module of the monetary system as it allows exchange to transpire with substances that have inherited profit. An example of store of value is currency. If the worth of currency becomes irregular...
Words: 1389 - Pages: 6
...Federal Reserve Paper Federal Reserve Paper The function and purpose of money is very simple; Money is meant to assist trade making life better. The purpose of money, whether it is credit cards, demand deposits or currency, it’s a means of exchange to buy services and goods. It is a known fact that all humans’ beings will accept it and also a tool taken in exchange for something else. Money has three functions in the economy. They are, the store of value which is has value and is transferred from one person to the next when purchasing services or goods, the unit of account which measures the debts and prices, and a medium of exchange which is a universal tool that allows sellers and buyers to trade money in exchange for services and goods. The central bank manages a nations monetary system thru a system we call the Federal Reserve or Fed. The Federal Reserve exercises considerable control over the demand for and supply of balances that depository institutions hold at the Reserve Banks. They manage our nation’s supply of credit and money and operate at the center of the nation’s financial system. They also keeps the wheels of business rolling with coin, currency and payments services, such as check-clearing and electronic funds transfer. The Federal Reserve sells and buys United States government bonds in open-market operations to control the supply and demand of money and make it move toward equilibrium. To decrease the supply of money the Fed sells government...
Words: 782 - Pages: 4
...Federal Reserve Banks ECO/372 September 10, 2012 The Federal Reserve Banks operate in the United States under the supervision of the Board of Governors in Washington. Each bank consists of board members who work with operations. The Federal Reserve Bank generates income from interest earned on government securities. The monetary policy generates income. The other form of income is comes from the Monetary Control Act of 1980. The act requires a price of services to depository institutions. The Federal Reserve does not operate for profits and the United States treasury receives earnings on a yearly basis. The Federal Reserve sets the baseline or the average for the interest rates. This is what other banks base their interest rates. The Federal Reserve can inject and take money out of the system because they responsible for printing the money. By injecting the money into the system, creates a discount rate. According to Businessdictionary.com (2012), An interest rate that is one of two that the Fed directly sets, whereby Federal Reserve member banks can receive funds via the Fed. Can also be referred to simply as the discount rate. The other rate set by the Federal Reserve Bank is known as the Federal funds rate. When more cash is in circulation, consumer’s interest rates get lowered, making borrow money easier for consumers. The economy has a major influence over how banks lend money and the interest rates get set. When the...
Words: 1117 - Pages: 5
