Chapter 2 - The Role of Money in the Macroeconomy

Question 0

Central Bank:

Answer 0

Central Bank: A governmental “bank for banks,” generally responsible for national monetary policy.

Question 1

Board of Governors of the Federal Reserve System:

Answer 1

Board of Governors of the Federal Reserve System: Seven individuals appointed by the President to run the central bank.

Question 2

Checking (checkable) deposits:

Answer 2

Checking deposits: Accounts at a financial institution (checking accounts) that permit the account holder to transfer funds to a third party via a check (an order to pay).

Question 3

Currency:

Answer 3

Currency: Coins and bills used as money.

Question 4

Deflation:

Answer 4

Deflation: Generally falling price levels.

Question 5

Demand Deposit:

Answer 5

Demand Deposit: Non interest bearing checking accounts.

Question 6

Federal Funds Market:

Answer 6

Federal Funds Market: The market for unsecured loans between banks, called federal funds.

Question 7

Gross Domestic Product:

Answer 7

GDP: The total value of goods and services produced in the domestic economy in a given year.

Question 8

Hyperinflation:

Answer 8

Hyperinflation: A rapid increase in general price levels, e.g., above 100 percent per year.

Question 9

Inflation:

Answer 9

Inflation: Generally rising price levels.

Question 10

Liquid Asset:

Answer 10

Liquid Asset: An asset that can be converted quickly into a medium of exchange without suffering a loss.

Question 11

Liquidity:

Answer 11

Liquidity: Ability to convert an asset into cash quickly with little loss in value.

Question 12

Money Market Deposit Accounts:

Answer 12

Money Market Deposit Accounts: Deposits with limited checking account privileges that typically pay an interest rate comparable to Treasury bills or other money market instruments.

Question 13

Money Market Mutual Funds:

Answer 13

Money Market Mutual Funds: Mutual funds that invest in money market instruments.

Question 14

Savings Deposits (savings accounts):

Answer 14

Savings Deposits: Non transactions deposits that can be withdrawn at any time such as a money market deposit account.

Question 15

Velocity:

Answer 15

Velocity: The rate of turnover of the money supply; the average number of times per year each dollar is used to purchase goods and services (often measured as GDP divided by the money supply).