1.(10pts) Use the following data:

a.Describe the three functions of money and give an example for each.

1.Store of Value - saving money in a bank, letting it appreciate.

2.Unit of account - instead of trading 1 cow for 10 sheep and having to remember that rate of exchange, we use money so that everything can be accounted for equally.

3.Medium of Exchange - universally understood that when I buy a orange I am going to give you money for it, not a chicken or a bag of cocoa beans.It helps facilitate transitions smoothly.

b.How large is the money supply (M1)?

$840 billion

c.How much excess reserves are there?

42 billion

d.What is the money multiplier?

e.What is the available lending capacity?

Total reserves:

$36 billion

Transactions deposits:

$600 billion

Cash held by public:

$300 billion

Bonds held by public:

$400 billion

Stocks held by public:

$140 billion

Gross domestic product:

$8 trillion

Interest rate:

6%

Reserve ratio:

5%