Purchase Solution

US Economy Function and Regulation

Not what you're looking for?

Ask Custom Question

75 words each

Need assistance with the following:
1. What are the three functions of money, and why are they important?
2. What are the differences between M1 and M2?
3. How can the Fed affect the money supply by using the discount rate?
4. Explain how banks are financial intermediaries. What are reserves? What are excess reserves? Explain how the Fed can affect the quantity of excess reserves in the banking system.
5. Discuss the factors that led to deregulation of U.S. financial markets in the 1980s.

Purchase this Solution
Solution Summary

Money is an entity that is widely accepted in exchange for goods and services as well as payment of debts. The three functions of money are: 1) Medium of exchange; 2) Unit of account; 3) Store of value

Medium of exchange: Money is used for buying and selling goods and services. If we imagine a world without money, then there will be no way of exchanging goods and services for something else.

Solution Preview

Assistance Needed
75 words each
Need assistance with the following:
1. What are the three functions of money, and why are they important?

Money is an entity that is widely accepted in exchange for goods and services as well as payment of debts. The three functions of money are: 1) Medium of exchange; 2) Unit of account; 3) Store of value
Medium of exchange: Money is used for buying and selling goods and services. If we imagine a world without money, then there will be no way of exchanging goods and services for something else. If there was no money, then goods would be traded for other goods in transactions arranged on the basis of mutual need. For example, if I want to buy a television, then I have to trade something else for it like a dining table. Money eliminates the need of the double coincidence of wants.
Unit of account. Money is the common standard for measuring relative worth of goods and service.

Store of value: Money is the most liquid asset. That is liquidity measures how easily assets can be spent to buy goods and services. Money's value can be retained over time. It is a convenient way to store wealth.

2. What are the differences between M1 and M2?

M1 includes currency, checkable deposits and traveller's checks. Currency and checkable deposits belonging to the federal government, Federal Reserve, and other financial institutions. It includes currency plus checkable deposits plus travelers' checks

M2 includes all of the components of M1 plus near moneys which includes items like:
Small time deposits that is interest earn deposits with a value of less than 100,000 and having specified maturity. It includes saving ...

Purchase this Solution
Free BrainMass Quizzes
Labor and Delivery

Do you know about the stages of delivery? Find out with this quiz!

CPR (Red Cross Standards)

Are you up to date on your CPR skills? Find out if you know what to do in an emergency with this quiz.

Test your health planning and program evaluation knowledge

Health planning and program evaluation is an important aspect of the Health Sciences' field. Organizations and communities must understand the needs of their audiences, and a way to obtain this datum is through proper design and assessment. This quiz will test your ability to understand the importance of planning and evaluation in the health sector.

What everyone should know about MRSA

This quiz focuses on what everyone should know about community MRSA. Community MSRA is an infection in healthy people.

Celiac Disease

This quiz will provide a brief introduction to Celiac Disease. Questions will focus on definitions and symptoms.

View More Free Quizzes
Related BrainMass Solutions

  • banking deregulation in the economy

    The banking deregulation in the US economy caused the increase in the foreign investment and it also caused an increase in the growth of the economy in financial terms.

  • Diminishing returns

    Between 1968 and 1980, the US economy experienced a slowdown in productivity growth. However, since the mid 1980s, the economy has experienced increases in the growth rate in productivity.

  • Monetary Policy and the Need for Reform in Financial Institutions

    Current Banking Crisis & Banking Regulations Earlier, in US, the households were the major contributor in the capital of US economy and then the foreign capital has become the major aspect for the capital source in US.

  • Functions and Operations of Investment Banks

    This is the primary function of BOA for the economic growth of US (Stowell, 2010).

  • Government Regulations add costs to American companies

    Hirschey noted further that government regulation of the market economy is a controversial topic because the power to tax and compel has direct economic consequences.

  • The Banking System

    The solutions shows that function of money in the economy, how it can be used as a tool in controlling inflation, and its acceptability by other countries. This solution is 575 words.

  • Transparency important in market-based vs bank-based systems

    The solution gives five reasons why transparency is so important in the market-based financial systems in the US economy followed by six reasons that discuss the banking sector in terms of regulation and transparency.

  • Role of the Federal Reserve

    What are the benefits and costs of financial regulation, and do the benefits exceed the costs? The financial institutions are heavily regulated because they form an important part of the country's economy.

  • Differences - U.S. banking system and the financial markets

    It is also through the fed that the regulation of the currency and credit is undertaken. This makes the economy not to experience rampant seasonal fluctuations in the rates of interest that will make the economy to be unstable.

  • regulation

    You may discuss its implication in both short run and long run for the stability of the US economy as compared to its current roller coaster state of uncertainty in the Wall Street (and in the Main Street).

View More Related Solutions