Matakuliah
Tahun
: J0594-Teori Ekonomi
: 2009
MONEY AND BANKING
Pertemuan 10
The Functions of Money
– Medium of Exchange
– Unit of Account
– Store of Value
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3
Components of the Money Supply
a. Money Definition M1
• Currency
– Coins and Paper Money
– Token Money
– Federal Reserve Notes
• Checkable Deposits
– Commercial Banks
– Thrift Institutions
• A Qualification
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– Government, Federal Reserve, and Banks
Excluded from M1
4
Components of the Money Supply
b. Money Definition M2
– Near-Monies
– Savings Deposits Including Money
Market Deposit Accounts (MMDA)
– Small Time Deposits
– Money Market Mutual Funds (MMMF)
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5
Money Defined
M1
February 2006
Currency +
54%
Checkable Deposits +
46%
M1
20%
Small Time Deposits +
15%
Money Market Mutual +
Funds Held By Individuals
(MMMF)
11%
Savings Deposits
Including Money Market
Deposit Accounts (MMDA)+
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M2
Totals
54%
$1,375
Billion
$6,758
Billion
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Money Definition MZM
–
–
–
–
Money Zero Maturity
Immediately Available
From M2 Subtract Small Time Deposits
Add Back Money Market Mutual Funds
Owned by Businesses (MMMF)
– Slightly Larger than M2
– February 2005 M2 was $6,758 Billion and
MZM was $6,934 Billion
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7
Money Supply
•
•
•
•
Are Credit Cards Money ?
What “Backs” the Money Supply?
Stable Value of Money
Money as Debt
– Acceptability
– Legal Tender
– Relative Scarcity
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8
Money Supply
• Money and Prices
– Purchasing Power of the Dollar
$V = 1/P
– Inflation and Acceptability
• Stabilizing Money’s Purchasing Power
– Intelligent Management of the Money Supply –
Monetary Policy
– Appropriate Fiscal Policy
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9
Federal Reserve System
Framework of the Federal Reserve
System and the Relationship to the Public
Board of Governors
Federal Open Market Committee
12 Federal Reserve Banks
Commercial Banks
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Thrift Institutions
(Savings and Loan Associations,
Mutual Savings Banks,
Credit Unions)
The Public
(Households and
Businesses)
10
Federal Reserve System
Fed Functions and the Money Supply
• Issuing Currency
• Setting Reserve Requirements and Holding
Reserves
• Lending Money to Banks and Thrifts
– Discount Rate
• Check Collection
• Fiscal Agent for U.S.
• Supervising Banks
• Controlling the Money Supply
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11
Federal Reserve System
The 12 Federal Reserve Banks
•
•
•
•
•
Private and Public Control
Central Bank
Quasi-Public Banks
Banker’s Banks
Commercial Banks and Thrifts
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12
Federal Reserve System
The 12 Federal Reserve Banks
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13