Define money and describe its functions.
Money is anything that serves as a generally accepted means of payment.
Money functions as a medium of exchange, unit of account, and store of value.
M1 consists of currency held by individuals and businesses, traveler’s checks, and checkable deposits owned by individuals and businesses.
M2 consists of M1 plus savings deposits, small time deposits, and money market funds.
Describe the functions of banks.
The deposits of commercial banks and thrift institutions are money.
Banks borrow short term and lend long term and make a profit on the spread between the interest rates that they pay and receive.
Describe the functions of the Federal Reserve System (the Fed).
The Federal ...