Money

Money

Joshua A. Grossman

ECO 212

August 18, 2010

Introduction

The subject of money is an interesting one to say the least. The central bank, ultimately the bank responsible for money has many moving such as making sure that the markets involving credit and banking are in place 24 hours a day. Our monetary policy is one where depending on the direction, our country may or may not be offering stability to the people of the United States. Further the Federal Reserve acts to implement monetary policies and uses it’s power to do everything it can to ensure the best economic outcome possible for our country. This paper will provide details on each of those items mentioned above by defining the purpose and function of money, explaining how the central bank manages a nation’s monetary system, state the direction of the most recent monetary policy in the United States, and explain the effects of monetary policy on the economy’s production and employment.

Purpose and Function of Money

Money, we all know that it comes in two forms, paper and coins. Depending on the person you ask, the definition of the purpose and function of money can mean different things to different people. I’ll start with the main purpose, to facilitate trading. By using money to purchase something, the money effectively buys a person some type of good or service. By using money, it services the buyer by allowing them to purchase the item or service and it serves the seller as they now get money for their product or service, therefore, allowing them the power to purchase items or services that they want. When thinking about money and its functions, there is definitely an emotional attachment. When using money in the two forms as described above, it’s sometimes hard for someone to part with their money for a good or service. Further if the person buys too much of a good or service, it can cause unhappiness or resentment toward the sellers, the items or services, and it can...