Discussion:
How can the Fed affect the money supply by using the discount rate?
1. Explain how banks are financial intermediaries. What are reserves? What are excess reserves? Explain how the Fed can affect the quantity of excess reserves in the banking system.
2. Discuss the factors that led to deregulation of U.S. financial markets in the 1980s.
3. What are the three functions of money, and why are they important?
4. What are the differences between M1 and M2?