Question

1.

define the economic role of money in modern economic systems especially Market economies

2.

define the Nation’s Money Supply and the role of the commercial banks in determining its SIZE

3.

define the fractional reserve banking law

4.

explain how the Central Bank (e.g. The Federal Reserve Banking System) uses “Open Market Operations” to change the SIZE of Nation’s MONEY SUPPLY

Answer 1

1 - Money plays very important role in the mordern economic system  it is a medium of exchange , a store of value and measure of value .  

2 - Nation's  money supply  is the total value of money available in country at a point of time is nation's money supply. commercial banks is determining the size by the helps of monetary policies , they can increase or decrease money supply in the nation .

3 - When you deposit your money , bank don't keep your money in hand , fractional reserve banking allows banks to invest your money but it it still shows in your account , it helps to grow economy by increasing money supply through  fractional reserve banking law.

4 - Federal  reserve bank use Open Market Operation for maintaining the money supply in the country during inflation money supply is high so , reserve bank sell their securities and for correcting the situation of deflation it purchase securities .

Thank You..................