Chapter 16, 16-1, 16-3, 16-4

Question 1

money

Answer 1

object that is portable, divisible, durable, and stable and serves as a medium of exchange, a store of value, and a measure of worth

Question 2

barter economy

Answer 2

way which goods are exchanged directly for one another

Question 3

M-1

Answer 3

measure of money supply that includes only the most liquid spendable forms of money

Question 4

forms of m-1

Answer 4

currency, check, checking account

Question 5

currency

Answer 5

cash; government issued paper money and metal coins

Question 6

check

Answer 6

demand deposit order instructing a bank to pay a given sum to a specified payee

Question 7

checking account

Answer 7

demand deposit; bank account funds, owned by the deposited, that may be withdrawn at any time by check or cash

Question 8

M-2

Answer 8

measure of money supply that includes components of M-1 plus the forms of money that can be easily converted into spendable forms

Question 9

forms of M-2

Answer 9

time deposits, money market mutual funds, savings accounts

Question 10

time deposits

Answer 10

bank funds that have a fixed term of time to maturity and cannot be withdrawn earlier or transferred by check

Question 11

money market mutual funds

Answer 11

fund of short-term, low risk financial securities purchased with the pooled assists of investor-owners

Question 12

federal deposit insurable corporation

Answer 12

guarantee the safety of deposits up to $250000 in the financial institutions that it insures

Question 13

functions of the FDIC

Answer 13

pay insurance to depositors

dispose of the bank’s assets and settle their debts

Question 14

federal reserve system

Answer 14

central bank of the US which acts as the governments bank , serves member commercial bank and controls the nation’s money supply

Question 15

monetary policy

Answer 15

management of the nation’s economic growth by managing the money supply and interest rates

Question 16

tools of the fed

Answer 16

reserve requirement
discount rate
federal funds rate
open market operations

Question 17

reserve requirement

Answer 17

percentage of its deposits that a bank must hold in cash or on deposit with the Fed

Question 18

discount rate

Answer 18

interest rate at which member banks can borrow money form the fed

Question 19

federal funds rate

Answer 19

key rate; interest rate at which commercial banks lend reserves to each other usually overnight

Question 20

open market operations

Answer 20

the Fed’s sale and purchase of securities in the open market