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Essay / Research Paper Abstract
This 4 page paper examines the Federal Reserve after examining economic theory. The three functions of money are discussed. Bibliography lists 3 sources.
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4 pages (~225 words per page)
File: RG13_SA923eco.rtf
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altering interest rates in the hopes that doing so will alter the economy for the better. By changing interest rates for example, it is believed that things will improve. Whether
or not Federal Monetary policy truly is effective is of course open to interpretation. That said, it is important for anyone in a financial field to closely watch the behavior
of the Fed. Their decisions almost immediately impact financial institutions and will indirectly affect all businesses. This is true no matter what economic theory an individual embraces. The Federal Reserve
is an important organization and its behavior does impact businesses. Thus, decisions made based on the current economy will be better decisions. II. The Three
Functions of Money According to Mankiw (2004) money has three specific functions, which are listed as follows: "It is a medium of exchange, a unit of account, and
a store of value" (p. 642). Money is used as a medium of exchange in that it is worth a certain amount and one can buy something such as a
shirt for instance with the proper amount of money (Mankiw, 2004). Money is a unit of account in that it is measurable and it is a store of value because
people are able to use money during another period of time (Mankiw, 2004). Money acts as a symbol of what it can buy as in and of itself, it generally
has no value. It is what backs the money up that is relevant and so currency and the government that backs it are very important elements. III.
How the Federal Reserve Manages the Monetary System The Federal Reserve is made up of a Federal Reserve Board as well as twelve federal regulators (Mankiw, 2004). The
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