9 final

Question 1

money

Answer 1

anything that is generally accepted as a means of payment

Question 2

barter

Answer 2

the direct exchange of one good for another good without a standard form of money passing from hand to hand

Question 3

specie

Answer 3

coined, metallic money

Question 4

face value

Answer 4

the asserted value of money

Question 5

inflation

Answer 5

the situation that occurs when market prices rise because too much money is in circulation

Question 6

deflation

Answer 6

the situation in which prices decrease because money seems more valuable and stable

Question 7

bullion

Answer 7

gold, silver, or platinum, usually in the form of bars, ingots, or plates

Question 8

fiat money

Answer 8

legal tender backed by nothing but a government’s promise

Question 9

near-money

Answer 9

asset that can be easily converted into M1 because it is highly liquid

Question 10

monetarism

Answer 10

the theory that variation in the money supply is the main source of economic fluctuations

Question 11

purposes of money

Answer 11

1. to be a medium of exchange
2. to provide a measure of value
3. to provide a store of value

Question 12

the ideal forms of money have these characteristics

Answer 12

1. portability- easily carried about
2. durability- slow to wear out
3. homogeneity- standard, recognizable appearance
4. divisibility- available for use in both large and small units
5. constancy- stability in value
6. intrinsic valuableness- worth something in its own right, aside from being recognized as money

Question 13

M1

Answer 13

that part of the money supply consisting of the money in transaction accounts, traveler’s checks, and all coins and currency held outside banks

Question 14

M2

Answer 14

that part of the money supply consisting of M1 plus non-checkable savings deposits, money market mutual funds and similar deposits, and time deposits worth less than $100

Question 15

M3

Answer 15

that part of the money supply consisting of M2 and time deposits worth over $100,000

Question 16

card smarts

Answer 16

1. keep your cards someplace safe. Record your cards’ numbers, expiration dates, and issuing companies and place this information somewhere other than in your wallet or purse
2. never let anyone else use your cards
3. contact the credit card company as soon as possible if you suspect a card is lost or stolen
4. examine receipts before you sign them and keep them to check against your billing statement
5. contact your credit card issuer if your receipts do not match your monthly statement
6. pay the entire amount you owe every month. Paying only the monthly minimum will cost you more in the long run since you will be charged interest on the amount you have not paid off

Question 17

The United States Department of the Treasury

Answer 17

federal agency responsible for producing currency and for partially overseeing the money supply; The Treasury Department includes the Bureau of Mint and the Bureau of Engraving and Printing

Question 18

The Federal Reserve System

Answer 18

the central banking network of the United States ultimately responsible for forming American Monetary policy and for controlling the national money supply

Question 19

Board of Governors

Answer 19

group of appointed officials who direct and supervise the Federal Reserve System

Question 20

Federal Open Market Committee (FOMC)

Answer 20

the Federal Reserve committee that makes decisions regarding the buying and selling of government securities

Question 21

Federal Reserve Banks

Answer 21

twelve central location, one in each of the Federal Reserve districts, that implement the the policies adopted by the board of governors

Question 22

the Federal Reserve is able to increase or decrease the amount of money in circulation through its three main tools

Answer 22

1. Open Market Operations- the buying and selling of government securities by the Federal Reserve
2. reserve ratios- the percentage of total deposits a bank must keep on hand
3. discount rates- the rate of interest the Federal Reserve’s district banks charge commercial banks for borrowing money

Question 23

“easy money” policies

Answer 23

more money in circulation through the ready approval on loan applications

Question 24

recession

Answer 24

a period during which the economy declines, or recedes; an economy usually has slide at least six months before economists classify it as being in recession; that part of the business cycle following peak

Question 25

“tight money” policy

Answer 25

discourages its member banks from making or renewing new loans. this policy is adopted in times of inflation

Question 26

Milton Friedman

Answer 26

Lived:1912-2006
Major contributions: He was a professor at the University of Chicago. The conservative principles of Friedman, his fellow teachers, and his followers came to be known as the “Chicago School.” Governmental officials sought his advice, and he was an advisor to President Ronald Reagan. He became associated with monetarism (the theory that variation in the money supply is the main source of economic fluctuations). He was a champion of private businesses and conservative citizens and economists everywhere.
Awards: 1976 Nobel Prize for economics