Chapter 29 & 30 Group C Homework

Homework for Group C
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1. What do we mean when we say, "money is whatever society says it is?"
2. Describe the components of M1, M2 and M3. In general, how do they differ?
3. What is "the Fed" and its main purpose?
4. Take a look at the following banking in-class demonstrations. Pick one of the three demos to perform with some friends, relatives, or other persons who owe you a favor:-) You are to act as the teacher in the demonstration and you are to attempt to teach the group the concept the demonstration is attempting to illustrate. Once the role playing is completed, answer the following questions.
1. Which demonstration did you choose and why?
2. Give a general description of your volunteers - approx age, gender, etc.
3. How did the demonstration go overall?
4. Did the volunteers seem to understand the concept being demonstrated? Why or why not?
5. Add any other comments you feel are relevant.
6. Did you enjoy this exercise and did you learn anything new by performing the demonstration? Why or why not?

1. "Money is whatever society says it is" implies that anything with "exchange value" and "use value" can be accepted by the public as a means of payment.

2. M1 --> demand deposit-balances in bank accounts that depositors can access on demand by writing a check. This includes traveler's checks and other checkable deposits. It also deals with currency of paper bills and coins in the hands of the public.

    M2 --> saving deposits, small deposits, money market mutual funds, and a few other minor categories. This also involves everything in M1. 

    M3 --> the combination of M1 and M2. 

3. The "Fed" is known as the Federal Reserve, which is the central back of the United States. The purpose of the "Fed" is to establish stability among the banking system in the US. The Federal Reserve has 2 main functions: 1. to regulate banks and ensure the health of the banking system, and 2. to control the quantity of the money that is made available in the economy, also known as the money supply.

4. The Inflation Fairy

1. I chose the Inflation Fairy exercise because it was an interesting concept many people misunderstand.
2. Age: 50, Sex: Male     Age: 19, Sex: Female
3. Overall, the demonstration went pretty well. 
4. Both volunteers understood the concept of inflation. The older gentleman quickly grasped the understanding of the exercise and gave personal examples of when that occurred. The younger female also understood what concept the exercise was for, but took her longer to fully understand. I had to give her a easy example to make her learn better.
5. 
   
6. I really enjoyed this exercise and I feel like I learned a great amount by trying to teach the concept to the different type of people. While the older man was trying to help me provide better examples, I was able to help the younger girl with simple and easy examples to allow her to understand it too.