Uses of Money

Due Week 4 Day 3 (Thursday)

What are the uses of money?

Medium of exchange- According to Hubbard and O’Brien (2010), this type of uses of money serves as a medium of exchange when sellers are willing to accept it in exchange for goods or service. Money acts as a common ground for determining value; it allows one to use systems of trade beyond the barter system.

Unit of account – This uses of money allows one to compare similar offers for goods and services to determine the best value, or used as a way to compare the values of goods and services.

Store of value – In the store of value, money is used to maintain the value of a transaction over time. If one receives monetary compensation for a good or service, the actual amount that is received does not change if he or she decides not to use it instantly.

Standard of deferred payment – In standard of deferred payment, money is used to for current purchases and in exchange for future payments.

How do banks increase the supply of available money?

The trading desk at the Federal Reserve Bank buys U.S. Treasury securities. The seller of these securities deposit the funds received from the Fed in bank, which increases the bank reserves. The Banks loan out most of these reserves, which will increase the money supply (Hubbard and O’Brien, 2010).

Is monetary policy conducted independently in the United States and is the intended effect always achieved? Why or why not?

Yes monetary policy is conducted independently in the United States by the Federal Reserve. The intended effect is not always achievable because of the external factors that are out of the Federal Reserve control such as the housing crisis, the increase in energy prices, and the decrease in value of the US dollar against other country currencies.

Due Week 4 Day 5 (Saturday)

What are the advantages and disadvantages of adjustable-rate versus fixed rate mortgages? Identify the conditions that must exist that make adjustable and fixed-rate...