BJU SSE 200 Economics PowerPoint Ch. 14
how do banks earn a profit?
- banks receive deposits from individuals in exchange for interest - banks lend deposited money to borrowers in exchange for more interest
define money
anything that is generally acceptable in exchange for goods and services
M2 =
M1 + some very liquid assets
what is NOT accepted in exchange for goods and services?
checks, credit cards, debit cards
M1 =
currency in circulation + checkable deposits
what in our economy is generally acceptable in exchange for goods and services?
currency, checkable deposits
what includes open market operations?
fed buys bonds from banks, fed gives new reserves to banks
Who creates money?
federal reserve
Banks are __ -profit businesses
for
Hyperinflation is caused by __
high rates of money growth
commodity money has __
intrinsic value
what makes money generally acceptable?
it has intrinsic value, people believe it is
what do banks do?
lend new reserves
Fiat money means__
people believe in it
money growth rate determines__
the long-run inflation rate
low rates of time preferences...
we place a greater value of consumption tomorrow
high rates of time preferences...
we place a greater value on consumption today