1058 WordsJul 26, 20155 Pages

1) People can lose faith in money because if the value becomes questionable, so will the acceptance of it. Economists believe that the better the fiat money serves as a store of value, the more acceptable it is. This statement basically means that since fiat money is not backed by anything of value, its not as easily accepted. Over time, people gradually come to accept the fiat money because they believe others will accept it also.
2) When the value of money was based on its gold content, new discoveries of gold were followed by periods of inflation because as the surplus of gold went up, so did the supply of money. When the supply of money surpasses its equilibrium, we get inflation.
3) A depository institution is a financial institutions such as a savings or commercial bank or credit union that allows customers to deposit monies. They act as intermediates between borrowers and savers by bringing together both sides of the money market. They gather amounts from savers and repackage the funds in to amounts desired by the borrowers. They assume the liability and basically reduce the transaction costs of channeling savings to creditworthy borrowers.
4) The main powers and responsibilities of the Federal Reserve System are providing financial services to depository institutions, the U.S. government, and foreign central banks, including playing a major role in clearing checks, processing electronic payments, and distributing coin and paper money to the nation 's banks,

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