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Three functions of money |
Medium of exchange |
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What is the problem with bartering? |
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? |
Increase in price of all other goods. |
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What has been the most common form of money throughout history? |
Metallic coins |
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With a gold standard, what three attributes does an economy with it have? |
Imposed limits on the amount of paper money in circulation |
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2 things considered currency... |
Coins and paper money |
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Besides currency, what else is considered money? |
Checking deposits, traveler's checks (M1). |
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M1 includes... |
Currency plus checking deposits (travelers checks). |
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M2 includes... |
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? |
Measures of money supply. |
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What bank serves all others? |
The Federal Reserve ("the Fed") |
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How does one become a Board of Governor of the Fed? |
Appointed by US president and confirmed by Senate. |
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How long is the Board of Governor of the Fed's term? |
One 14 year term. |
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Chairman of the Board of Governors between 1987 and 2006 |
Alan Greenspan |
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The Fed was instituted in _____. |
1913 |
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How many districts does the Fed divide into? |
12 districts. |
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The voting members for the FOMC include... |
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. |
False. |
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This is liability for a bank. |
Deposits |
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Why shouldn't banks keep too much money in the form of reserves? |
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? |
Initially, they increase. |
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Open-Market Operations involves the buying and selling of ______ by the Fed to change bank _______. |
bonds; reserves |
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Name what each of the variables mean: M=CU+D |
M- Money supply |
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Name what each of the variables mean: Br=rr x D |
Br- Bank reserves |
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Name what each of the variables mean: M x V=P x Y |
M- Money supply |
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What does velocity mean? |
How frequently money moves in an economy |
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The most common government cause of hyperinflation is when... |
They print too much money due to high expenditures. |
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How is money and income different? |
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 |
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What things could affect the value of the currency-to-deposit ratio? |
acceptance of credit cards, number of businesses that accept checks, fear of crime. |
