Financial Sector

Liquidity remains constant, but interest rates fall

Liquidity decreases as banks use reserves to purchase these assets

Liquidity increases with additional assets entering marketplace

There is no change in liquidity due to equal exchange of cash for securities

Store of value

Standard for barter

Medium of exchange

Unit of account

Both parties benefit equally as long-term contracts account for potential inflation changes.

It benefits creditors as they receive more valuable dollars in repayment.

It has no effect on contracts because inflation was not anticipated.

It benefits debtors as they pay back with dollars that are worth less.

An initial depreciation followed by appreciation as market adjusts slowly to rate changes.

No change in the exchange rate since interest rates do not impact capital flows directly.

Depreciation of its currency as investors seek lower-yielding investments elsewhere.

Appreciation of its currency due to increased foreign investment inflows.

Retain purchasing power over time.

Only be held by banks or governments.

Fluctuate greatly in worth day-to-day.

Be exchanged directly for any good or service.

Not affect exports as currency value does not influence international trade.

Decrease exports due to higher prices for foreign buyers.

Decrease imports because domestic goods become relatively cheaper.

Increase exports by making them more competitive abroad.

Standard of deferred payment

Store of value

Unit of account

Medium of exchange

Reducing taxes

Expanding the money supply

Increasing interest rates

Increasing government spending

Acceptability

Uniformity

Portability

Divisibility

Quantitative easing by purchasing long-term securities to inject liquidity into the banking system.

Decreasing the discount rate further even though it's already near zero percent level.

Raising reserve requirements for banks to incentivize increased lending at prevailing low-interest rates.

Implementing contractionary fiscal measures such as increased taxation in hopes of redirecting funds into investments rather than consumption.