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September 19, 2021 

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PAPER CURRENCY: Paper usually issued by the national government that are used as money. Metal coins are also frequently included under the generic heading of currency. Currency in the U.S. economy is issued by the Federal Reserve System (paper) and the U.S. Treasury (coins). This constitutes about 30 to 40 percent of the M1 money supply. Most modern currency is fiat money.

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Lesson 19: Money Creation | Unit 3: Modern Banking Page: 15 of 23

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  • That modern banks practice fractional-reserve banking, which is the key to money creation.
  • That any reserves over those required to meet a given percentage are called excess reserves, which are used by banks to make loans, increase checkable deposits, and create money.
  • That when a bank receives a deposit, two things happen: the bank adds to vault cash, or reserves, and it adds to its liabilities, the customer's account.
  • That when a check is cleared reserves are transferred from one bank to another.
  • That when banks makes loans, they create deposits, and create money.
  • That the amount of checkable deposits created is a multiple of the amount of excess reserves obtained by the banking system.

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MONETARY POLICY TARGETS

Values of specific economic variables that the monetary authority seeks achieve with monetary policy. The three most noted monetary policy targets are interest rates, monetary aggregates, and exchange rates. These targets are usually intermediate targets that can be quickly achieved and easily measured, but then move the economy toward the ultimate macroeconomic goals of full employment, stability, and economic growth.

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Today, you are likely to spend a great deal of time at a flea market trying to buy either a 200-foot blue garden hose or a video camera with stop action features. Be on the lookout for letters from the Internal Revenue Service.
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This isn't me! What am I?

Lewis Carroll, the author of Alice in Wonderland, was the pseudonym of Charles Dodgson, an accomplished mathematician and economist.
"When you play, play hard; when you work, don't play at all. "

-- Theodore Roosevelt, 26th US president

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