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Macroeconomic Impact on Business Operations
Currency maintains its value because people will accept it in exchange for goods and services. They accept it because they know they will also be able to exchange it for goods and services.
In addition to functioning as a medium of exchange, money also serves as a unit of value-a single measure for assessing the value of all the various goods and services produced and sold in an economy. Moreover, money is also a store of value- a way of accumulating wealth so it can be used at a later date. Stocks and bonds serve a similar function because they can be quickly converted to money. In essence, money is the most readily available form of wealth.
Economists have many definitions of money or, more accurately, the money supply. The money supply includes money as one usually think of it, plus various bank deposits and financial instruments. The fact that money is both a medium of exchange and a store of value points to one of the major type of demand for money: Asset demand.
Asset demand is the amount of money that people in an economy wants to hold as money, usually in bank accounts or in the form of near money, such as shares in money market funds.
As the newly appointed Chairman of the Fed, one of my key focus areas would be to control the nation's economy by choosing an appropriate monetary policy. Monetarists believe that changes in the money supply are the most important factor determining the level of GDP, and that the Feds should permit steady, non-inflationary growth in the money supply. (Siegel, G.2006)
The Federal Reserve System ("the Fed") is the central bank of the United States. The ...