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