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46 Cards in this Set

  • Front
  • Back
Money functions as:
A medium of exchange,
store of value, and
a unit of account
If you write a check on a bank to purchase a care, you are using money primarily as:
a medium of exchange
If you place part of your summer earnings in a savings account, you are using money primarily as:
a store of value
a $70 price tag on a sweater in a department store window is an example of money functioning as:
a unit of account
when economist say that money serves as a medium of exchange, they mean
that it i "a means of payment"
purchasing common stock by writing a check best describes money as:
a medium of exchange
The largest component of the money supply (M1) is:
currency in circulation
Paper money in the US is called:
Federal Reserve notes
When economist say that money serves as a store of value, they mean
that it is a way to keep wealth in a readily spendable form for future use
When economist say that money serves as a unit of account, they mean
that is a monetary unit for measuring and comparing the relative value of goods
Currency in circulation is part of:
M1, M2 and MZM money supply
Checkable deposit are included in what money type?
M1 money supply
Money supply is backed by the government’s ability
to control the supply of money and to keep its value relatively stable
The money supply in the US is comprised of
coins, paper currency and checkable deposits
A $50 dollar bill is a:
Federal Reserve Note
MZM stands for:
Money zero Maturity
Paper money in the US is issued by
the Federal Reserve Bank
MZM includes
M2 minus small time deposit plus money market mutual funds held by businesses
The value of money varies
inversely with the price level
The basic policy making body in the US banking system is
The Board of Governors of the Federal Reserve
The twelve Federal Reserve Banks hold
the reserve deposits of commercial banks
How many members are there in the Federal Reserve Board?
7 members
How many years do members of the Federal Reserve Board serve for?
14 years
Who created money:
The Goldsmiths
Their ability to create money was based on the fact that
paper money in the form of gold receipts was rarely redeemed for gold
When the receipts given by the Goldsmiths to depositors were used to make purchases
the receipts became in effect paper money
The most modern banking system today is based on:
Fractional Reserve
A fractional reserve system is susceptible to
bank panics
Bank panics are
a risk of fractional reserve banking, but are unlikely when banks are highly regulated and lend prudently
In a fractional reserve banking system, banks can create money through
the lending process
The following identify parts of the Balance Sheet
Assets equal liabilities plus net worth
The reserves of a commercial bank consist of:
deposits at the Federal Reserve Bank and vault cash
Commercial Banks reserves are
assets to the commercial bank and liabilities to the federal reserve bank holding them
The primary purpose of the legal reserve requirement is
to provide a means by which the monetary authorities can influence the lending ability of commercial banks
The transaction demand for money is most closely related to money functioning
as a medium of exchange
The desire to hold money for transactions purposes arises because
receipts of income and expenditures are not perfectly synchronized
The opportunity cost of holding money varies
directly with the interest rate
It is costly to hold money because in doing so
one sacrifices interest income
The asset demand for money varies
inversely with the rate of interest
The asset demand for money is down sloping because
the opportunity cost of holding money increases as the interest rates rises
In the US monetary policy is the responsibility of
the Board of Governors of the Federal Reserve System
The three main tools of monetary policy are:
reserve ratio, discount rate and open market operations
The purchase of government securities from the public by the Fed will cause:
the money supply to increase
The purpose of a restrictive monetary policy is
to raise interest rates and restrict the availability of bank credit
The asset demand for money varies inversely with the nominal GDP
The Higher the interest rate, the larger will be the amount of money demand for transactions purposes