Eco/561 | Economics homework help

  1. In this chapter, we are beginning our discussion that we will continue exploring over the next several weeks.  These two concepts are the money supply (M1) and the discount rate – or the rate that the Federal Reserve sets that a bank can borrow funds – usually overnight.   Review the link below for a discussion on the money supply and respond to the following –


Why does the money supply matter – why does it have the effect that it does?

 

http://www.tradingeconomics.com/united-states/money-supply-m1

 

  1. An important concept to quickly point out is the three functions of money – medium of exchange, unit of account, and store of value. Medium of exchange is money that is used to buy and sell goods and or services. An example would be a farmer would not want to be paid in bananas or fish, they would want to be paid with money. The next function is unit of account. Unit of account is defined as ” a standard unit in which prices can be stated and the value of goods and services can be compared.”(McConnell, Brue, & Flynn,2015, pg G32) Third and lastly store of value. Store of value is defined as” an asset set aside for future use.” (McConnell, Brue, & Flynn, 2015, pg G29)  An example of this would be keeping your money in a bank account to use at a later date. 

 

McConnell, C. R., Brue, S. L., & Flynn, S. M. (2015). Economics: Principles, problems, and policies (20th ed.).

 

 

 

 

  1. The average family in the US has more than $15,000 in credit card debt (Issa, 2015).  However, it would be very interesting to see more data on this as I could believe this is higher.  I have to admit that I am a heavy user of my credit card, as it consolidates my bills (power bill, insurance, telephone, etc.) so I only have one payment and I earn reward points on using for everyday items.  However, the trick is to ensure that the card balance is paid off in full each month to avoid interest charges. As with any type of credit, the key is to be responsible with credit.  

 

El Issa, Erin. 2015 American Household Credit Card Debt Study.  

https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/

 

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