1. 10 MONEY AND PRICES IN THE LONG RUN 長期的貨幣與物價

2. Copyright © 2004 South-Western 29 The Monetary System 貨幣體系

3. Copyright © 2004 South-Western THE MEANING OF MONEY Money is the set of assets in an economy that people regularly use to buy goods and services from other people. 貨幣：經濟體系中，人們通常用來購買商品 與服務的資產。

4. Copyright © 2004 South-Western The Functions of Money Money has three functions in the economy: Medium of exchange Unit of account Store of value 貨幣的功能 交易媒介 計價單位 價值儲存

5. Copyright © 2004 South-Western The Functions of Money Medium of Exchange ( 交易媒介 ) A medium of exchange is an item that buyers give to sellers when they want to purchase goods and services. A medium of exchange is anything that is readily acceptable as payment.

6. Copyright © 2004 South-Western The Functions of Money Unit of Account ( 計價單位 ) A unit of account is the yardstick people use to post prices and record debts. Store of Value ( 價值儲存 ) A store of value is an item that people can use to transfer purchasing power from the present to the future.

7. Copyright © 2004 South-Western The Functions of Money Liquidity Liquidity is the ease with which an asset can be converted into the economy’s medium of exchange. 流動性：一項資產被轉換成交易媒介的難易程 度。

8. Copyright © 2004 South-Western The Kinds of Money 貨幣的種類 Commodity money takes the form of a commodity with intrinsic value. Examples: Gold, silver, cigarettes. 商品貨幣：貨幣本身即具備某種固有財貨的 價值。 例如：黃金、白銀、香菸

9. Copyright © 2004 South-Western The Kinds of Money 貨幣的種類 Fiat money is used as money because of government decree. It does not have intrinsic value. Examples: Coins, currency, check deposits. 強制貨幣：不具備固有價值的貨幣，要靠政 府法令規定才能具備貨幣的功能。 例如：鑄幣、紙幣、支票存款。 THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE

10. Copyright © 2004 South-Western

11. Money in the U.S. Economy Currency is the paper bills and coins in the hands of the public. 通貨：社會大眾手中的紙鈔與鑄幣。 Demand deposits are balances in bank accounts that depositors can access on demand by writing a check. 活期存款：存款人可隨時開支票提款的存款 種類。

12. Figure 1 Money in the U.S. Economy Copyright©2003 Southwestern/Thomson Learning Billions of Dollars Currency ($580 billion) Demand deposits Traveler’s checks Other checkable deposits ($599 billion) Everything in M1 ($1,179 billion) Savings deposits Small time deposits Money market mutual funds A few minor categories ($4,276 billion) 0 M1 $1,179 M2 $5,455

13. Copyright © 2004 South-Western 貨幣存量 M1A= 通貨淨額 + 企業及個人 ( 含非營利團體 ) 在貨幣機構之支票存款及活期存款 M1B=M1A+ 個人 ( 含非營利團體 ) 在貨幣機構 之活期儲蓄存款 或 M1B= 通貨淨額 + 存款貨幣 M2=M1B+ 準貨幣

14. Copyright © 2004 South-Western 信用卡、簽帳卡與貨幣

15. Copyright © 2004 South-Western CASE STUDY: Where Is All The Currency? In 2001 there was about $580 billion of U.S. currency outstanding. That is $2,734 in currency per adult. Who is holding all this currency? Currency held abroad Currency held by illegal entities Q 美國打算增加美元通貨，買進債券，引起 美元貶值，為什麼？ (20090322)

16. Copyright © 2004 South-Western THE FEDERAL RESERVE SYSTEM The Federal Reserve (Fed) serves as the nation’s central bank. It is designed to oversee the banking system. It regulates the quantity of money in the economy. Fed 作為中央銀行的功能 1. 監督、管理銀行 ( 我國部份管理銀行的功能 轉交給金融機構監督管理委員會 ) 2. 控制經濟體系中可以使用的貨幣數量。

17. Copyright © 2004 South-Western 作業 上網查詢美國的中央銀行 Fed 的組織、功能 、理事主席等 書面報告 A4 單面一張以下 口頭報告三分鐘以內

18. Copyright © 2004 South-Western THE FEDERAL RESERVE SYSTEM The Fed was created in 1914 after a series of bank failures convinced Congress that the United States needed a central bank to ensure the health of the nation’s banking system.

19. Copyright © 2004 South-Western THE FEDERAL RESERVE SYSTEM The Structure of the Federal Reserve System: The primary elements in the Federal Reserve System are: 1) The Board of Governors 2) The Regional Federal Reserve Banks 3) The Federal Open Market Committee

20. Copyright © 2004 South-Western The Fed’s Organization The Fed is run by a Board of Governors, which has seven members appointed by the president and confirmed by the Senate. Among the seven members, the most important is the chairman. The chairman directs the Fed staff, presides over board meetings, and testifies about Fed policy in front of Congressional Committees.

21. Copyright © 2004 South-Western The Fed’s Organization The Board of Governors Seven members Appointed by the president Confirmed by the Senate Serve staggered 14-year terms so that one comes vacant every two years. President appoints a member as chairman to serve a four-year term.

22. Copyright © 2004 South-Western The Fed’s Organization The Federal Reserve System is made up of the Federal Reserve Board in Washington, D.C., and twelve regional Federal Reserve Banks.

23. Copyright © 2004 South-Western The Fed’s Organization The Federal Reserve Banks Twelve district banks Nine directors Three appointed by the Board of Governors. Six are elected by the commercial banks in the district. The directors appoint the district president, which is approved by the Board of Governors.

24. The Federal Reserve System Copyright©2003 Southwestern/Thomson Learning

25. Copyright © 2004 South-Western The Fed’s Organization The Federal Reserve Banks The New York Fed implements some of the Fed’s most important policy decisions.

26. Copyright © 2004 South-Western The Fed’s Organization The Federal Open Market Committee (FOMC) Serves as the main policy-making organ of the Federal Reserve System. Meets approximately every six weeks to review the economy.

27. Copyright © 2004 South-Western The Fed’s Organization The Federal Open Market Committee (FOMC) is made up of the following voting members: The chairman and the other six members of the Board of Governors. The president of the Federal Reserve Bank of New York. The presidents of the other regional Federal Reserve banks (four vote on a yearly rotating basis).

28. Copyright © 2004 South-Western The Fed’s Organization Monetary policy is conducted by the Federal Open Market Committee. Monetary policy is the setting of the money supply by policymakers in the central bank The money supply refers to the quantity of money available in the economy.

29. Copyright © 2004 South-Western The Federal Open Market Committee Three Primary Functions of the Fed Regulates banks to ensure they follow federal laws intended to promote safe and sound banking practices. Acts as a banker’s bank, making loans to banks and as a lender of last resort. Conducts monetary policy by controlling the money supply.

30. Copyright © 2004 South-Western The Federal Open Market Committee Open-Market Operations The money supply is the quantity of money available in the economy. The primary way in which the Fed changes the money supply is through open-market operations. The Fed purchases and sells U.S. government bonds.

31. Copyright © 2004 South-Western The Federal Open Market Committee Open-Market Operations To increase the money supply, the Fed buys government bonds from the public. To decrease the money supply, the Fed sells government bonds to the public.

32. Copyright © 2004 South-Western BANKS AND THE MONEY SUPPLY Banks can influence the quantity of demand deposits in the economy and the money supply.

33. Copyright © 2004 South-Western BANKS AND THE MONEY SUPPLY Reserves are deposits that banks have received but have not loaned out. In a fractional-reserve banking system, banks hold a fraction of the money deposited as reserves and lend out the rest.

34. Copyright © 2004 South-Western BANKS AND THE MONEY SUPPLY Reserve Ratio The reserve ratio is the fraction of deposits that banks hold as reserves.

35. Copyright © 2004 South-Western Money Creation with Fractional-Reserve Banking When a bank makes a loan from its reserves, the money supply increases. The money supply is affected by the amount deposited in banks and the amount that banks loan. Deposits into a bank are recorded as both assets and liabilities. The fraction of total deposits that a bank has to keep as reserves is called the reserve ratio. Loans become an asset to the bank.

36. Copyright © 2004 South-Western Money Creation with Fractional-Reserve Banking This T-Account shows a bank that… accepts deposits, keeps a portion as reserves, and lends out the rest. It assumes a reserve ratio of 10%. AssetsLiabilities First National Bank Reserves $10.00 Loans $90.00 Deposits $100.00 Total Assets $100.00 Total Liabilities $100.00

37. Copyright © 2004 South-Western Money Creation with Fractional-Reserve Banking When one bank loans money, that money is generally deposited into another bank. This creates more deposits and more reserves to be lent out. When a bank makes a loan from its reserves, the money supply increases.

38. Copyright © 2004 South-Western The Money Multiplier How much money is eventually created in this economy?

39. Copyright © 2004 South-Western The Money Multiplier The money multiplier is the amount of money the banking system generates with each dollar of reserves.

40. Copyright © 2004 South-Western The Money Multiplier AssetsLiabilities First National Bank Reserves $10.00 Loans $90.00 Deposits $100.00 Total Assets $100.00 Total Liabilities $100.00 AssetsLiabilities Second National Bank Reserves $9.00 Loans $81.00 Deposits $90.00 Total Assets $90.00 Total Liabilities $90.00 Money Supply = $190.00!

41. Copyright © 2004 South-Western The Money Multiplier The money multiplier is the reciprocal of the reserve ratio: M = 1/R With a reserve requirement, R = 20% or 1/5, The multiplier is 5.

42. Copyright © 2004 South-Western The Fed’s Tools of Monetary Control The Fed has three tools in its monetary toolbox: Open-market operations ( 公開市場操作 ) Changing the reserve requirement ( 改變準備率 ) Changing the discount rate ( 改變重貼現率 )

43. Copyright © 2004 South-Western The Fed’s Tools of Monetary Control Open-Market Operations The Fed conducts open-market operations when it buys government bonds from or sells government bonds to the public: When the Fed buys government bonds, the money supply increases. The money supply decreases when the Fed sells government bonds.

44. Copyright © 2004 South-Western The Fed’s Tools of Monetary Control Reserve Requirements The Fed also influences the money supply with reserve requirements. Reserve requirements are regulations on the minimum amount of reserves that banks must hold against deposits. 最低存款準備率

45. Copyright © 2004 South-Western The Fed’s Tools of Monetary Control Changing the Reserve Requirement The reserve requirement is the amount (%) of a bank’s total reserves that may not be loaned out. Increasing the reserve requirement decreases the money supply. Decreasing the reserve requirement increases the money supply.

46. Copyright © 2004 South-Western The Fed’s Tools of Monetary Control Changing the Discount Rate The discount rate is the interest rate the Fed charges banks for loans. Increasing the discount rate decreases the money supply. Decreasing the discount rate increases the money supply.

47. Copyright © 2004 South-Western Problems in Controlling the Money Supply The Fed’s control of the money supply is not precise. The Fed must wrestle with two problems that arise due to fractional-reserve banking. The Fed does not control the amount of money that households choose to hold as deposits in banks. The Fed does not control the amount of money that bankers choose to lend.

48. Copyright © 2004 South-Western Summary The term money refers to assets that people regularly use to buy goods and services. Money serves three functions in an economy: as a medium of exchange, a unit of account, and a store of value. Commodity money is money that has intrinsic value. Fiat money is money without intrinsic value.

49. Copyright © 2004 South-Western Summary The Federal Reserve, the central bank of the United States, regulates the U.S. monetary system. It controls the money supply through open- market operations or by changing reserve requirements or the discount rate.

50. Copyright © 2004 South-Western Summary When banks loan out their deposits, they increase the quantity of money in the economy. Because the Fed cannot control the amount bankers choose to lend or the amount households choose to deposit in banks, the Fed’s control of the money supply is imperfect.