UGBA 10 Lecture Notes - Lecture 5: Fractional-Reserve Banking, Federal Reserve System, Prime Rate

• School: Berkeley
• Department: Business Administration Undergraduate Program
• Course: UGBA 10
• Professor: John Briginshaw

Document Summary

Money: object that is portable, divisible, durable, and stable, and that serves as a medium of exchange, a store of value, and a measure of worth. Fa(cid:373)ilial relatio(cid:374)ships: (cid:862)gift e(cid:272)o(cid:374)o(cid:373)(cid:455)(cid:863) rather tha(cid:374) e(cid:454)(cid:272)ha(cid:374)ge e(cid:272)o(cid:374)o(cid:373)(cid:455) Tally stick/beads or written records of debts: records may be denominated in cows or grain. Concept of money supply: ho(cid:449) (cid:373)u(cid:272)h (cid:862)(cid:373)o(cid:374)e(cid:455)(cid:863) (cid:894)ho(cid:449)e(cid:448)er defi(cid:374)ed(cid:895) is i(cid:374) (cid:272)ir(cid:272)ulatio(cid:374) M-2: measure of the money supply that includes all the components of m-1 plus the forms of money that can be easily converted into spendable forms. Included in m-2 but not m-1: the convertible money supply. Time deposit: bank funds that have a fixed term of time to maturity and cannot be withdraw earlier or transferred by check. Money market mutual fund: fund of short-term, low-risk financial securities purchased with the pooled assets of investor-owners. The reason for tracking and investigating the money supply is that excessive growth in the money supply can lead to inflation.