Money, Money, Money

In this final Case Assignment, we will be answering questions about types of money, how the Fed uses money, and what happens when there is money but it is not being spent. This is a multi-part assignment, so make sure that you have addressed each question or topic. The best way to approach this assignment is to prepare your responses in outline form following the order of each question/topic. This will help you keep track of your responses.

Review this brief introductory video which provides a high level overview of the Fed and how it influences the money market.

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Case Assignment

Submit a 4- to 5-page paper that addresses the following questions. Be sure to use references within the paper to support your answers.

Are credit cards or debit cards money? Explain your answer.

“When the Fed makes an open market purchase of government securities, the quantity of money will eventually decrease by a fraction of the initial change in the monetary base.” Is the previous statement correct or incorrect? Explain your answer.

Monetary policy is action taken by the Fed to influence the level of real GDP. Suppose the Fed wants to increase the money supply. What three tools could the Fed use to achieve this goal? Be specific in your answer and discuss the implications of this policy.

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