๐Ÿ›๏ธ Monetary Policy Basics ๐Ÿ“บ

๐Ÿฆ A Simple Introduction [2020 Update] ๐Ÿ“ˆ

by Eric Smith

Video: "Level I CFA: Economics: Monetary and Fiscal Policy-Lecture 1"

The following lectures provide a nice overview of this topic:

1) Money

1.1) What is Money?

Money denotes a standardized common medium of exchange used across an entire region.

1.2) Characteristics of Money

Money has the following features:

1.3) Purposes of Money

2) Monetary Policy

2.1) What is Monetary Policy?

Monetary Policy denotes the actions of the Central Bank directed towards influencing interest rate levels and money supply in an economy.

3) Banking

3.1) What is a Central Bank?

The Central Bank is the monopoly currency supplier in a particular region, and acts as the banker to the government and the banker's bank.

The roles of the Central Bank include the following:

3.2) Fractional Reserve Banking

Fractional Reserve Banking denotes the system of banking in which banks only hold a fraction of total deposits with them as reserves, based on the premise that not all customers will want all their money back at the same time.

4) Interest Rates

4.1) Fischer Effect

According to the Fischer Effect, the nominal interest rate is simply the sum of the real interest rate and expected inflation.

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