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

The Central Bank of the U.S.

FEDfederalreserve.gov

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