Let’s start with what money is and what it does. Money is “anything that is generally accepted in payment for goods and services.” (Mishkin, 2010) Money needs to have value to the people within a society in order to fill this role. One of the primary roles of money is to be used as payment for goods or services; it also reflects value or price levels and retains value over time. Currency is the actual form of the “acceptable” money. Money that is made of a valuable commodity, such as silver or gold, is called commodity money. As is typical of economies as they mature, the United States has moved away from commodity money to paper money. The money is backed not by the value of the commodity, but by a promise for payment.
The flow of funds happen in the financial markets as mentioned above. This isn’t a plac...
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... shock waves through the world’s financial markets. We more quickly hear and react to financial news, whether good or bad.
As I said in the intro, it’s difficult to limit what we learned to three items. We have found that there are a great many factors that contribute to the functioning of the financial system and they all seem to overlap as well. It is also difficult to prioritize them. I do feel that the role of the Central Banks is important as they seem to provide the foundation on which the rest of it sits. I feel that the information within this course should be something that is taught at the high school level. People need to have a basic understanding of how the financial system works. It impacts them everyday.
Mishkin, Frederic S., (2010) The Economics of Money, Banking & Financial Markets 9th Edition, Boston, Addison-Wesley Publishing
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