Topic Four

The Role of Money and the Banking System

Required Readings:

  • Read Module: Monetary Policy, first 14 items
  • The Wall Street Journal

Additional Readings:

LEARNING OBJECTIVES FOR TOPIC 4:

  • You should be able to define money in your own words.
  • You should be able to explain the various functions of money.
  • You should be able to explain “liquidity”.
  • You should be able to explain how the existence of money improves the workings of an economy.
  • You should be able to define financial markets, and explain how they improve the workings of an economy.
  • You should be able to explain the important economic functions banks provide.
  • You should be able to explain the difference between M1, M2, and M3.

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