EC 111 Chapter 16 || with 100% Verified Solutions.
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EC 111 Chapter 16 |
Institution
EC 111 Chapter 16 |
What are the functions of money? correct answers Medium of exchange
Unit of account
Store of Value
What are the types of money? correct answers commodity and Fiat money.
Without money correct answers Trade would require Barter.
Requires a double coincidence of wants
waste of reso...
EC 111 Chapter 16 || with 100% Verified Solutions.
What are the functions of money? correct answers Medium of exchange
Unit of account
Store of Value
What are the types of money? correct answers commodity and Fiat money.
Without money correct answers Trade would require Barter.
Requires a double coincidence of wants
waste of resources.
Barter correct answers The exchange of one good or service for another.
Double coincidence of wants correct answers Unlikely occurrence that two people each have a
good the other wants.
Waste of resources correct answers People spend time searching for others to trade with.
Medium of exchange correct answers Item that buyers give to sellers when they want to purchase
goods and services
Unit of account correct answers Yardstick people use to post prices and record debts
Store of value correct answers Item that people can use to transfer purchasing power from the
present to the future
Commodity money correct answers Takes the form of a commodity with intrinsic value.
Ex: Gold coins, Cigarettes in POW camps.
Fiat money correct answers Money without intrinsic value, used as money because of
government decree.
Ex: US dollar
The money supply (Or money stock) correct answers quantity of money available in the
economy
Currency correct answers paper bills and coins in the hands of the public (non-bank).
Demand deposits correct answers balances in bank accounts that depositors can access on
demand by writing a check.
, Central bank correct answers Institution that oversees the banking system and regulates the
money supply
Monetary policy correct answers Setting of the money supply by policymakers in the central
bank
Federal reserve (Fed) correct answers The central bank of the U.S.
The Federal reserve system consist of? correct answers Board of governors
12 regional Fed banks
Federal open market committee (FOMC)
Board of governors correct answers Has 7 members and is located in Washington, DC
12 regional Fed banks correct answers these banks are located around the U.S.
Federal open market committee (FOMC) correct answers Includes the board of governors and
the presidents of some of the regional Fed banks.
They decide monetary policy
In a fractional reserve banking system, correct answers banks keep a fraction of deposits as
reserves and use the rest to make loans.
The reserve ratio (R) correct answers =Fraction of deposits that banks hold as reserves.
=total reserves as a percentage of total deposits
T-account correct answers A simplifies accounting statement that shows a banks assets and
liabilities.
Banks liabilities include deposits
Assets include loans and reserves.
Suppose $100 of currency is in circulation. to determine banks' impact on money supply. you
would calculate the money supply in what 3 different cases? correct answers no banking system
100% reserve banking system (Banks hold 100% of deposits as reserves, make no loans).
fractional reserve banking system.
Case 1: No banking system correct answers Public holds the $100 as currency
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