Functions & Characteristics of Money
Name the 3 functions of money
Unit of Accounting
Store of Value
Medium of Exchange
Something that can be turned into currency quickly without the risk of losing value is called...
near money
The Federal Reserve
If credit is inexpensive and easy to get, is the Fed using a loose or tight monetary policy?
Loose
All money in the U.S. today is what type of money?
(Commodity, Fiat, or Representative)
Fiat
Name the 6 characteristics of money.
Durable
Portable
Accepted
Divisible
Stable in value
Scarce
Money that is backed by a valuable item (such as gold) is called...
How do the Board of Governors of the Fed get their job?
Appointed by President & confirmed by Senate
The Fed is considering lowering the reserve requirement, lowering the discount rate, and/or buying government bonds. Are they trying to expand or contract the money supply?
Expand
What is the difference between a credit card and a debit card?
Debit comes out of your bank account, credit is borrowed money
coins: Bureau of the Mint
bills: Bureau of Engraving and Printing
M2 is a (narrower/broader) definition of money than M1.
broader
To make monetary policy
Which group in the Fed makes decisions about raising or lowering the interest rate?
FOMC
If you are using money to compare the value of two different things, which function of money are you using?
Unit of accounting
Placing money into a checking account is using which function of money?
Store of value
A llama is an example of which type of money?
Commodity
How many Federal Reserve district banks are there?
12
The downfall of loose monetary policy is that it could lead to increased...
Inflation
Which 12-member group in the Fed advises on general market and business conditions?
FAC
What is a drawback of electronic banking?
Acceptable answers:
Privacy
Hacking
Computer malfunctions
Job loss
Of the following, which would be included in M1?
Currency, travelers checks, demand deposits, savings deposits, checkable deposits, money market mutual funds, small time deposits
currency, travelers checks, demand deposits, other checkable deposits
Two-part question:
1) How does a bank become a member of the Fed?
2) Which type of bank HAS to become a member of the Fed?
1) Buy stock in district bank
2) National bank
The drawback of tight monetary policy is that it could lead to increased...
Unemployment
Why might the Fed reduce the federal funds rate during a period of economic weakness?
To increase investment/stimulate economy/encourage borrowing