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30 Cards in this Set
- Front
- Back
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Three functions of money
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Medium of exchange
Store of value Unit of account |
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What is the problem with bartering?
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Any good can be used as a medium of exchange.
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What will result, if gold is being used as money, if the supply goes up of it?
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Increase in price of all other goods.
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What has been the most common form of money throughout history?
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Metallic coins
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With a gold standard, what three attributes does an economy with it have?
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Imposed limits on the amount of paper money in circulation
Controls inflation Price of gold is fixed by the gov't |
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2 things considered currency...
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Coins and paper money
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Besides currency, what else is considered money?
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Checking deposits, traveler's checks (M1).
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M1 includes...
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Currency plus checking deposits (travelers checks).
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M2 includes...
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M1 plus small time deposits, savings accounts and deposits, and other deposits in which check writing is limited or not allowed.
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What are M1 and M2?
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Measures of money supply.
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What bank serves all others?
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The Federal Reserve ("the Fed")
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How does one become a Board of Governor of the Fed?
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Appointed by US president and confirmed by Senate.
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How long is the Board of Governor of the Fed's term?
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One 14 year term.
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Chairman of the Board of Governors between 1987 and 2006
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Alan Greenspan
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The Fed was instituted in _____.
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1913
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How many districts does the Fed divide into?
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12 districts.
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The voting members for the FOMC include...
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The Federal Reserve Board and 5 of the 12 Fed district presidents.
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(T/F) The FOMC has to get permission from the President to make decisions.
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False.
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This is liability for a bank.
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Deposits
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Why shouldn't banks keep too much money in the form of reserves?
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Then they wouldn't bring in any interest for the banks. Loans give them this. (Less money for loans=LESS MONEY MADE)
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What happens to a bank's reserves when the Fed buys bonds from them?
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Initially, they increase.
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Open-Market Operations involves the buying and selling of ______ by the Fed to change bank _______.
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bonds; reserves
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Name what each of the variables mean:
M=CU+D |
M- Money supply
CU- Currency D- Deposits |
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Name what each of the variables mean:
Br=rr x D |
Br- Bank reserves
rr- reserve ratio D- deposits |
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Name what each of the variables mean:
M x V=P x Y |
M- Money supply
V- Velocity P- GDP deflator Y- Real GDP |
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What does velocity mean?
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How frequently money moves in an economy
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The most common government cause of hyperinflation is when...
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They print too much money due to high expenditures.
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How is money and income different?
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Money is what you have available in an instant in time. Income is what you'll make or have over a period of time.
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Name what each of the variables mean:
CU= k x D |
CU- Currency
k- Currency to deposit ratio D- Deposits |
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What things could affect the value of the currency-to-deposit ratio?
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acceptance of credit cards, number of businesses that accept checks, fear of crime.
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