BA 1301 Study Guide - quiz Guide: Open Market Operation, Savings Account, Discount Window
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Scarcity: money should be scarce enough to have some value but still must be available. Durability: any item used as money must be durable. Divisibility: money must be capable of being divided into smaller parts. Medium exchange: less complicated than a barter system. Standard of value: pricing in an acceptable manner. Store of value: money does not decrease in value. Composed of currency, demand deposits, and time deposits. Demand deposits are checking accounts, savings account, and whatever can be withdrawn on demand. M1: total of all currency and demand deposits. Conduct open market operations: buy/sell bonds to increase/decrease the money supply. The fed also set rules on credit for consumers and investors. Low-interest rates and very loose credit standards led to a huge increase in loans and housing prices. Leading financial investment firms had sold high risk, mortgage-backed products failed. Back then they did not have fdic so if the bank did not have money, then you did not either.