Examples of non-monetary in the following topics:
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Non-Monetary Employee Compensation
- Non-monetary benefits are essential to attracting a productive workforce.
- It is standard practice in U.S. culture to offer basic non-monetary benefits to full-time, permanent employees.
- Companies also use non-monetary benefits to increase and maintain employee morale and satisfaction.
- Employers have several options with respect to non-monetary compensation.
- The largest category of non-monetary compensation includes benefits.
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Benefits and non-monetary compensation
- Benefits and other forms of non-monetary compensation are becoming more appropriate forms of compensation for employees in today's workplace.
- A benefit is a "general, indirect and non-cash compensation paid to an employee" that is offered to at least 80 per cent of staff (Employee Benefits Definition).
- On average, 40 per cent of payroll is dedicated to non-cash benefits (Kulik, 2004).
- If a company offers employees extremely high wages compared to other businesses in the industry in addition to non-monetary compensation, costs may increase at a faster rate than profit.
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Involuntary Conversion
- Unlike a voluntary sale, involuntary conversion of assets can involve an asset exchange for monetary or non-monetary assets .
- Monetary assets consist of cash or cash-equivalent assets.
- Non-monetary assets are not easily converted to cash, such as equipment.
- An exchange between non-monetary assets should be analyzed to determine if the exchange has commercial substance.
- For non-monetary asset exchanges without commercial substance, the expectation is that the exchange will not materially alter future cash flows.
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Answers to Chapter 14 Questions
- By the time monetary policy influences an economy, the economy is already growing, and the monetary policy causes the economy to grow quickly, creating inflation.
- Monetary policy has an immediate impact on operating targets like the federal funds rates and non-borrowed reserves.
- Over time, monetary policy influences the intermediate targets.
- The Fed's monetary policy coincides with the business cycle.
- Monetary policy is supposed to do the opposite and smooth out the business cycles.
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Time Lags and Targets
- The Fed cannot influence the monetary policy goals directly.
- Unfortunately, three time lags hinder monetary policy.
- Operating targets are the federal funds rate and non-borrowed reserves.
- When the Fed uses open-market operations, changes discount policy, or alters reserve requirement, the Fed's monetary policy has an immediate impact on the federal funds rate and non-borrowed reserves.
- Monetary policy can become ineffective in some cases.
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Control of the Money Supply
- A nation's money supply is determined by the monetary policy actions of its central bank.
- A nation's money supply is determined by the monetary policy actions of its central bank.
- While purchases of government securities prove to expand the total monetary base, the selling of government securities will ultimately contract a nation's monetary base.
- An increase in reserve requirements would decrease the monetary base; a decrease in the requirements would increase the monetary base.
- This is why they advocated a non-interventionist approach—one of targeting a pre-specified path for the money supply independent of current economic conditions— even though in practice this might involve regular intervention with open market operations (or other monetary-policy tools) to keep the money supply on target.
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The Capital Account
- The capital account acts as a sort of miscellaneous account, measuring non-produced and non-financial assets, as well as capital transfers.
- Under the International Monetary Fund (IMF) definition, however, most of these asset flows are captured in the financial account.
- Instead, the capital account acts as a sort of miscellaneous account, measuring non-produced and non-financial assets, as well as capital transfers.
- The capital account can be split into two categories: non-produced and non-financial assets, and capital transfers.
- Non-produced and non-financial assets include things like drilling rights, patents, and trademarks.
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Measuring the Money Supply
- Measures of money are typically classified as levels of M, where the monetary base is the smallest and lowest M-level: M0.
- (The narrow money supply is an earlier term used in the U.S. to describe currency held by the non-bank public and demand deposits of banks, M1).
- M0: In some countries, such as the United Kingdom, M0 includes bank reserves, so M0 is referred to as the monetary base, or narrow money.
- MB: This is referred to as the monetary base or total currency.
- Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions.
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Changes in the Monetary Base
- If the Fed's balance sheet changes, subsequently, both the monetary base and money supply change.
- Next, we substitute the monetary base formula into Equation 3 because the monetary base equals deposits held by depository institutions plus currency in circulation, or B = D + C.
- After substituting the monetary base into Equation 3, we yield Equation 4.
- Total Liabilities = Monetary base (B) + U.S.
- Equation 6 shows how a change in the Fed's balance sheet affects the monetary base.
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Introduction to Monetary Policy
- Monetary policy is the process by which a monetary authority controls the money supply, often to produce stable prices and low unemployment.
- A monetary authority will typically pursue expansionary monetary policy when there is an output gap - that is, a country is producing output at a lower level than its potential output.
- By contrast, a monetary authority will pursue a contractionary monetary policy when it considers inflation a threat.
- In response, the monetary authority may reduce the money supply and thereby raise the interest rate.
- By controlling the money supply, monetary authorities hope to influence the rate of inflation.