The Financial Sector
Money Matters and Interest Rates
By the end of this chapter, you will be able to:
- Identify three functions that money performs in the economy.
- Distinguish among barter, commodity money, and fiat (token) money.
- Define two different measures of the U.S. money supply (M1 and M2).
- Describe the process of money (deposit) creation. Define and explain the importance of the deposit multiplier.
- Describe how equilibrium is achieved in the money market.
- Identify three monetary policy tools and describe how they are changed to adjust the money supply in the pursuit of policy objectives.
- Explain the impact of the interest sensitivity of money demand on the effectiveness of monetary policy.
- Explain the impact of the interest ...