Features of Money:
1. Durability: Money must be able to withstand physical wear and tear.
2. Portability: Money needs to be easily transportable and lightweight.
3. Divisibility: Money should be easily divided into smaller units.
4. Uniformity: Any two units of money must be uniform or identical to each other in terms of what they will buy.
5. Limited Supply: The supply of money in circulation needs to be limited to maintain its value.
6. Acceptability: Everyone must accept money for it to function as a medium of exchange.

Purposes of Money:
1. Medium of Exchange: Money is used to buy and sell goods and services.
2. Unit of Account: Money is used to measure the value of goods and services.
3. Store of Value: Money allows wealth to be stored and used for future consumption.

Tools of Money Supply with Federal Reserve System:
1. Open Market Operations: The purchase and sale of government securities in the open market by the Federal Reserve.
2. Discount Rate: The interest rate charged by the Federal Reserve to commercial banks for loans.
3. Reserve Requirements: Regulations on the minimum amount of reserves that banks must hold against deposits.

Creation of Money:
Banks create money through the lending process. When a bank gives out a loan, it creates a deposit for the borrower, effectively creating money.

Required Reserve:
This is the minimum amount of reserves a bank is required to hold by law. It is a percentage of the bank's total deposits.

Frictional Reserve:
This is the reserve held by the bank to meet day-to-day operational needs and cash withdrawal demands of the customers.

Excess Reserve:
This is the reserve held by the bank over and above the required reserve. Banks can use this reserve to give out loans and thus create more money.

Question

Features of Money:
1. Durability: Money must be able to withstand physical wear and tear.
2. Portability: Money needs to be easily transportable and lightweight.
3. Divisibility: Money should be easily divided into smaller units.
4. Uniformity: Any two units of money must be uniform or identical to each other in terms of what they will buy.
5. Limited Supply: The supply of money in circulation needs to be limited to maintain its value.
6. Acceptability: Everyone must accept money for it to function as a medium of exchange.

Purposes of Money:
1. Medium of Exchange: Money is used to buy and sell goods and services.
2. Unit of Account: Money is used to measure the value of goods and services.
3. Store of Value: Money allows wealth to be stored and used for future consumption.

Tools of Money Supply with Federal Reserve System:
1. Open Market Operations: The purchase and sale of government securities in the open market by the Federal Reserve.
2. Discount Rate: The interest rate charged by the Federal Reserve to commercial banks for loans.
3. Reserve Requirements: Regulations on the minimum amount of reserves that banks must hold against deposits.

Creation of Money:
Banks create money through the lending process. When a bank gives out a loan, it creates a deposit for the borrower, effectively creating money.

Required Reserve:
This is the minimum amount of reserves a bank is required to hold by law. It is a percentage of the bank's total deposits.

Frictional Reserve:
This is the reserve held by the bank to meet day-to-day operational needs and cash withdrawal demands of the customers.

Excess Reserve:
This is the reserve held by the bank over and above the required reserve. Banks can use this reserve to give out loans and thus create more money.

Knowee AI · Accepted Answer

Features of Money:
1. Durability: Money must be able to withstand physical wear and tear.
2. Portability: Money needs to be easily transportable and lightweight.
3. Divisibility: Money should be easily divided into smaller units.
4. Uniformity: Any two units of money must be uniform or identical to each other in terms of what they will buy.
5. Limited Supply: The supply of money in circulation needs to be limited to maintain its value.
6. Acceptability: Everyone must accept money for it to function as a medium of exchange.

Purposes of Money:
1. Medium of Exchange: Money is used to buy and sell goods and services.
2. Unit of Account: Money is used to measure the value of goods and services.
3. Store of Value: Money allows wealth to be stored and used for future consumption.

Tools of Money Supply with Federal Reserve System:
1. Open Market Operations: The purchase and sale of government securities in the open market by the Federal Reserve.
2. Discount Rate: The interest rate charged by the Federal Reserve to commercial banks for loans.
3. Reserve Requirements: Regulations on the minimum amount of reserves that banks must hold against deposits.

Creation of Money:
Banks create money through the lending process. When a bank gives out a loan, it creates a deposit for the borrower, effectively creating money.

Required Reserve:
This is the minimum amount of reserves a bank is required to hold by law. It is a percentage of the bank's total deposits.

Frictional Reserve:
This is the reserve held by the bank to meet day-to-day operational needs and cash withdrawal demands of the customers.

Excess Reserve:
This is the reserve held by the bank over and above the required reserve. Banks can use this reserve to give out loans and thus create more money.

Explain features of money. Also discuss purposes of money.Discuss tools of money supply with Federal Reserve System.What is creation of Money? Discuss Required Reserve, Frictional Reserve and Excess Reserve.

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