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Money and Monetary Policy - Coggle Diagram
Money and Monetary Policy
Money_Functions
Medium of exchange: used to buy or sell goods
Store of value: Holds value over time
Unit of account: standard measure for prices
Money_types
Commodity money: gold, silver, sth that has intrinsic value
Commodity backed money: paper money that is backed by commodity
Fiat money: value bc gov declares it legal tender
Monetary aggregates
M1: cash or liquids(Checks)
M2: M1 + saving deposits, money market funds
Monetary base: currency in circulation, bank reserves
Central bank & federal reserve
Central bank: controls nation’s money supply
Open mkt operations
Inflation targeting: goal=2% inflation
Banking systems
Fractional reserve banking system
Bank reserves: deposits held by banks
Required reserve ratio: minimum % set by central bank
Required reserves
Excess reserves
Money market
Money demand curve: downward slopes
Money supply curve
Money supply(M1+M2)