Economics: Functions of Money, Federal Funds Rate, Balance Sheet, Money Supply

Running head: ECONOMICS
Economics
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Name of the University:
Author’s Note:
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1ECONOMICS
Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................3
Answer to Question 3:.....................................................................................................................4
Part a:...........................................................................................................................................4
Part b:...........................................................................................................................................5
Answer to Question 4:.....................................................................................................................6
Part a:...........................................................................................................................................6
Part b:...........................................................................................................................................6
Answer to Question 5:.....................................................................................................................7
References:......................................................................................................................................8

2ECONOMICS
Answer to Question 1:
The effect of money is considerable on the lives of all individuals. The individuals
earning more money could consume more goods and services, which increase their standard of
living. Money is termed as currency as well and it performs three main functions in an economy,
which are described as follows:
Medium of exchange or payment:
When individuals are working in organizations, they often expect to receive their
payments in currency, which could be spent readily on stuffs like clothing, food and other
products and services (Godley & Lavoie, 2016). Thus, money serves as a way of exchanging
products and services across an economy and it does not rely on barter system. Thus, goods and
services could be purchased and sold easily. For example, it might be troublesome for an
individual to purchase the needed stuffs, if the payment is made in the form of products that the
organization produces, instead of money.
Unit of account:
Money helps in providing a meaningful measure of the value of a product or service and
a technique of recording and reconciling financial transactions. When numbers are placed on the
values of the products and services, comparison could be made easily (Aruoba, Davis & Wright,
2016). As a result, the individuals not having adequate knowledge about a particular product or
service could measure the expensiveness of the product.
Store of value: