ECON 104 Lecture Notes - Lecture 6: Excess Reserves, Reserve Requirement, Moodle
27 Mar 2014
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Worksheet 6 money, the fed and monetary policy. Due in class or on moodle friday nov 1st: what makes up the demand for money? (3, a transaction demand this is the only demand recognized by classical economists. It is inversely proportional to the interest rate: precautionary demand any money reserved to meet unforeseen expenses, what is money in the u. s. , m1 physical currency (i. e. cash, checking account deposits, etc). Why or why not: no, because the money being used to pay for something when using a credit card is not actually money. It is just a placeholder in the form of credit that can be payed for in the form of a bill. Use words: banks make money by taking a percentage of the money people deposit into bank accounts (regulated by the fed about 90%) and invest that money in businesses/interests that they think will grow. To this effect, banks can make money for themselves.
