SNAPSHOT Show Me the Money! In a modern economy, the trade of a good or service
ID: 1110936 • Letter: S
Question
SNAPSHOT Show Me the Money! In a modern economy, the trade of a good or service between a buyer and a seller is achieved by using money, which is the medium of exchange. Over the centuries, money has evolved from coins made of precious metals, to pieces of paper redeemable in a precious metal, to numbers on a computer screen that are redeemable in nothing and have value only because consumers have confidenoe in the entity issuing the money. In the United States, the govemment controls money through its central bank, the Federal Reserve Bank. Measures of U.S. Money Supply (2015) There are two main categories of money in the United States, M1 and M2. M1 is cold hard cash-that is, actual currency, plus funds in checking deposits at local banks. M2 includes M1 plus savings, traveler's checks and money-market funds. M1 ($3,035.8 billion) M1 Breakdown CURRENCY CHECKING DEPOSITS TRAVELER'S CHECKS n bilians of dallars AMOUNT $1,326.6 $1,706.6 $2.6 M2 Breakdown M1 SAVINGS DEPOSITS SMALL TIME DEPOSITS MONEY MARKET MUTUAL FUNDS in biions of dollavs AMOUNT $3,035.8 $8,118.4 $429.4 $618.0 Credit cards don 't count in the money supply. A Timeline of Currency Cattle Coins Wampum Commodity-backed paper inoney Moden U.S. fiat currency Seashells Widespread Asla Minor North America Asla, Atica, North America China United States 9000 BCE 1200 BCE 640 BCE 800 1500 or earller 1971Explanation / Answer
Total money created by banking system ($ Billion) = Checkable deposits / Required reserves ratio
= 1,706.6 / 0.08
= 21,332.5
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