356 Module 6 Re-cap

For the Written Assignment: Money and banking is truly at the heart of the modern economy. The influence of the Federal Reserve cannot be over-stated these days. I believe the public needs to be better informed about the workings of the banks and the process of money creation. Hope this unit helped. Here is a brief summary of what I was looking for in the questions:

1. Inflation erodes the real value (purchasing power) of $$$.

2. Credit cards are just instant access to a “pre-approved” loan.

3. SCARCITY of money is what in economic terms gives it value.

4. Banks make their profits by loaning any excess reserves.

5. A loan is spent, the money is re-deposited, another loan is made, more spending occurs, and so on…..

6. These rates signal the Fed’s view of the economy and any changes trigger responses in the money markets.

7. Lower interest rates mean more construction spending.

8. When interest rates rise, there is less consumption and investment spending.

9. An appreciation of the dollar would make our imports cheaper which should help the overall inflation picture.

Regarding the Web Assignment: The Fed is where the real power is these days. Just look at the impact on the Stock Market of any expected or real increases or decreases in interest rates. We are lucky the Board of Governors has remained above the political nonsense that characterizes Washington. The Fed’s anti-inflation policies of the past 30 years have worked- let’s hope their current policies to stimulate the economy are just as effective. A couple years ago the Fed reached the point where they could not cut interest rates much more, as they got to their lowest point in 40 years. Perhaps they have shot all their bullets?

A full summary of the Exam is now available.

“Original document by Peter Turner licensed CC BY”