Post on 12-Jan-2017
Macroeconomics
Lecture 14
The Monetary System
Questions
How old to you have to be to be considered an adult for the purposes of calculating the unemployment rate?
Are you included in the labor force?
If 300 people are unemployed and the unemployment rate is 6%, how many people are employed?
What percent of the U.S. population is 16 and older?
What are the three categories that the Bureau of Labor Statistics (BLS) uses to classify adults?
What is the labor force participation rate in the U.S.?
How many adult Americans are not in the labor force?
Who is responsible for measuring and reporting the unemployment rate in the U.S.?
How many unemployment surveys does the BLS conduct each month?
If I am unemployed and become a discouraged worker, what happens to the unemployment rate?
What is the difference between the current population survey and the current employment statistics survey?
Are you considered employed if you run your own business?
If I work on my dad's farm during potato harvest, but am not paid, am I considered employed?
If I have a job but am on vacation, am I considered employed?
If I only work one hour a month, am I considered employed?
If I have been looking for a job for more than 4 weeks, am I part of the labor force?
I have not had a job in 10 years. Last week I started looking for a job. What category do I fall into?
I am 15 and work for my dad. What category do I call into?
3,850 people are employed. The unemployment rate is 30%. How many people are in the labor force?
Over the past 70 years has the labor force participation rate increased for decreased for women?
16
No
4,700
79%
Employed, Unemployed, Not in the Labor Force
63%
94 million
BLS
2
decrease
households vs. business
yes
Yes
Yes
Yes
Yes
unemployed
Not in Labor Force
3,850 ÷ .7 = 5,500
Increased
What is money?
Functions of Money
Medium of exchange
Unit of account
Store of value
Medium of Exchange
Buyers give to sellers
Sellers accept from buyers
Unit of Account
Measurement
Prices
Debts
Store of ValueTrading time for time
Today for tomorrow
Tomorrow for today
Earn - Save - Spend
LiquidityHow easy is it to convert
something to money
Kinds of MoneyCommodity
Fiat
Commodity MoneyIntrinsic value
Easy to carry
Easy to measure
Easy to verify
Hard to copy
=
Gold Standard
Central Bank will convert paper money to gold at a fixed rate
Fiat Money
No intrinsic value
Declared money by government decree
Fiat Money
Why do people accept fiat money?
Trust that someone else will also accept it
Money
Trust inscribed
If people lose trust, money loses it value
Coins
Currency
Checks
Card Type Payment
Credit Defer
Debit Instant
Why credit and debit cards are not money
Not a method of payment, but a method of
making payment
Debit card is like a check
Takes money out of your bank account
Credit Card
Defer the payment
Demand Deposits
Bank account that you can access by writing a check or using a debit
card
Central Bank
The bank that oversees the banking system and
regulates the money supply in a country
Central Bank
Every country has a central bank
Federal Reserve Bank
1913seven board members
nominated and confirmed14 year term
Chairman
4 year termmost important
Janet Yellen
Chairman of the Board
Governors
FED
Federal Reserve Bank
regulate bankscontrol money supply
12 regional banks25 branch offices
Fed Functions• Issues national currency
• Clearing of checks
• The bank of banks - lender of last resort
Federal Open Market Committee
FMOC7 board governors12 regional banks
5 of the regionals votealways NY Fed
Money Supply
The quantity of money available in a country.
Monetary Policy
Setting the money supply by the central bank policymakers