Federal Reserve
through its influence over the money supply, the Federal Reserve has more influence over aggregate demand than any other institution
shifts in aggregate demand can greatly influence the economy in the short run
federal reserve has the power to create money
doesn’t have to literally print money, it can add reserves to bank accounts held at the Federal Reserve
this new money can be given away or lent out in a way that increases aggregate demand
Federal Reserve’s most important job is to regulate the US money supply
Federal Reserve is the government’s bank
maintains the US Treasury account
manages government borrowing through US Treasury bonds, bills, and notes
Federal Reserve is also the banker’s bank
regulates banks and lends them money
manages nations payment system
protects financial consumers with disclosure regulations
money: a widely accepted means of payment
most important assets that serve as means of payment in the US today:
currency (paper bills and coins)
total reserves held by banks at the Federal
checkable deposits (your checking or debit account)
savings deposits, money market mutual funds, and small-time deposits
liquid asset: an asset that can be used for payments or, quickly and without loss of value, can be converted into an asset that can be used for payments
assets differ in their degree of liquidity depending on how quickly they can be converted into an asset that can be used for payment
currency: coins and paper bills held by people and nonbank firms
a lot of US cash is used on other countries
Panama, Ecuador, El Salvador, and others use the US dollar as their official currency
dollars are often used unofficially in unstable countries as a means of preserving wealth
total reserves play an important role in the financial system
all major banks have accounts at the Federal Reserve
they use them to trade with other banks and the Federal Reserve itself
it’s not currency, but electronic claims that can be converted into currency if the bank wishes
checkable deposits: deposits that you can write checks on or access with a debit card
these are deposits used most often in making daily transactions
aka demand deposits
you can access this money “on demand”
through its influence over the money supply, the Federal Reserve has more influence over aggregate demand than any other institution
shifts in aggregate demand can greatly influence the economy in the short run
federal reserve has the power to create money
doesn’t have to literally print money, it can add reserves to bank accounts held at the Federal Reserve
this new money can be given away or lent out in a way that increases aggregate demand
Federal Reserve’s most important job is to regulate the US money supply
Federal Reserve is the government’s bank
maintains the US Treasury account
manages government borrowing through US Treasury bonds, bills, and notes
Federal Reserve is also the banker’s bank
regulates banks and lends them money
manages nations payment system
protects financial consumers with disclosure regulations
money: a widely accepted means of payment
most important assets that serve as means of payment in the US today:
currency (paper bills and coins)
total reserves held by banks at the Federal
checkable deposits (your checking or debit account)
savings deposits, money market mutual funds, and small-time deposits
liquid asset: an asset that can be used for payments or, quickly and without loss of value, can be converted into an asset that can be used for payments
assets differ in their degree of liquidity depending on how quickly they can be converted into an asset that can be used for payment
currency: coins and paper bills held by people and nonbank firms
a lot of US cash is used on other countries
Panama, Ecuador, El Salvador, and others use the US dollar as their official currency
dollars are often used unofficially in unstable countries as a means of preserving wealth
total reserves play an important role in the financial system
all major banks have accounts at the Federal Reserve
they use them to trade with other banks and the Federal Reserve itself
it’s not currency, but electronic claims that can be converted into currency if the bank wishes
checkable deposits: deposits that you can write checks on or access with a debit card
these are deposits used most often in making daily transactions
aka demand deposits
you can access this money “on demand”