Question

1. a. What are the three functions of money? Give a brief description of each. (0.3 point)

b. If money is anything that fulfills the three functions of money, do you think that a credit card is money? Yes or no? Explain. (0.2 point)

2. The federal reserve system, also called the Fed, is the central bank of the United States of America. What are the main powers of the Fed? (0.4 point)

3. a. What did the FOMC said about the conditions of the economy (about GDP, unemployment, and inflation)? (0.3 point)

b. What did the FOMC decides to do about the interest rates (monetary policy) given the conditions of the economy (no change, increase or decrease by how much)? (0.2 point)

Answer 1

1. a. What are the three functions of money? Give a brief description of each

• The medium of exchange - money is the most efficient medium of exchange, without which we would have a barter system of exchanging commodities of different value instead of money.
• Store of Value - money stores value (either increase or decrease) on the basis of time promoting growth and savings sin the economy. It is liquid and widely acceptable.
• Unit of account - money is a common measure of goods and services being bought and exchanged.

b. If money is anything that fulfills the three functions of money, do you think that a credit card is money? Yes or no? Explain.

No, a credit card is not as same as money, to some extent it performs all the functions of money but Credit cards are authorization from banks enabling customers to borrow to a certain limited amount. These amounts are calculated by banks and lending institutions. A credit card is not money, they are debt and must be repaid to banks.

The federal reserve system, also called the Fed, is the central bank of the United States of America. What are the main powers of the Fed?

The main powers of FED are-

• Making monetary policy.
• Supervising and regulating financial Institutions
• Promotion of financial stability
• Promotion of consumer protection and development of the community.

3. a. What did the FOMC say about the conditions of the economy (about GDP, unemployment, and inflation)?

The Committee reaffirms its judgment that

• inflation at the rate of 2 percent. The Committee would be concerned if inflation were running persistently above or be-low this objective.
• Natural Rate of Unemployment forecast is to reduce unemployment to 4.4% (2020) from 4.6% (2019).
• The projection for change in GDP is to 1.9 (2020) from 2.1 (2019).