Uses of Money

Discussion Questions
Ardmond Pree
June 20, 2011
David E. Sella-Villa

Discussion Questions
What are the uses of money?
  * Money is used for the purchase of goods, services and satisfaction of debt. Anything used as “money” should fulfill four functions: serve as a medium of exchange, give a unit of account, must have capability to be saved or increased in value and finally, be able to serve as a standard of deferred payment.
  * Banks create money by accepting deposits and making loans. Those loans then become assets and turn into money.
  * Monetary policy is conducted independently in the United States. The board of governors, a seven-member panel appointed by the President of the United States to non-renewable 14-year terms. The intended effect is not always achieved however. The intended effect of monetary policy is price stability, high employment, financial market stability and economic growth. Of all the intended effects, none are really being upheld. Unemployment and economic growth are two particular areas of concern.
  * The difference between contractionary and expansionary monetary policy is that contractionary monetary policy helps stabilize prices. This is done by decreasing the money supply and increasing rates. Expansionary monetary policy helps increase employment by increasing money supply and decreasing interest rates.
  * The pros of using expansionary policy tools under recession, depression and robust economic growth are as follows:
  * When contradictionary monetary policy is used, it adversely affects the economy. In most cases, the policy is contributing to the problem itself. This policy tool is usually implemented when inflation is out of control and the money supply needs controlling.
  * When expansionary monetary policy is used, it is in fact acting as its root word (expand) suggests. This is used to stimulate the economy, especially during times of financial crisis. This is primarily done by lowering...