Chapter 15

Question 1

List the three functions of money

Answer 1

1. Mediums of exchange
2. Measures value of price and people
3. Gives people a way to save and accumulate wealth

Question 2

What are the three main tasks of the federal reserve

Answer 2

1. Keep inflation low
2. Keep unemployment low
3. Keep growth in economy high

Question 3

List and describe the four monetary policy tools and how they effect the economy (Orville Retired Despite Cats)

Answer 3

1. Open market operations: increase to speed up
   Decrease to slow down
2. Reserve requirement:
   Increase to slow down
   Decrease to speed up
3. Discount rate: the interest rate the bank must pay the federal reserve to loan money
   Increase to slow down
   Decrease to speed up
4. Credit controls: limit the amount of risks a bank can take (on investors)

Question 4

Explain the steps of how demanders receive funds from the bank since they need money

Answer 4

1. Suppliers of the funds - households & individuals, have money
2. Suppliers make deposits, premiums, and investments to financial institutions
3. Financial institutions loan and issue investments to demanders

Question 5

List some example of financial institutions BSCMFLMRBI

Answer 5

Banks
Saving & Loan association (S&L)
Credit unions
Mutual savings banks
FDIC
Life insurance
Mutual funds
401 retirement programs
Brokerage firms 
Investment banks

Question 6

Describe the purpose of the Steagall Act of 1929

Answer 6

The Steagall act was passed after the market crash in 1929 and said that banks couldn’t participate in investments and banking because it was too risky

Question 7

What bill replaced the Steagall Act of 1929 and what did it say

Answer 7

Gramm-Leach-Biley Bill which appealed the Steagall Act

stated that banks could now provide investment and insurance together because all of its international competitors could and it wouldn’t be able to keep up

Question 8

Describe the action of the Dodd-Frank Act passed in 2008

Answer 8

2500 pages
Limited the risk taking of the bank
Required capital