Chapter 6 Flashcards
What is money?
Anything that is generally acceptable in making exchanges
What is barter?
trade without money
What does a “double coincidence of wants” mean?
With barter, one must find someone who both wants what he has and has what he wants.
How does money evolve from barter?
Eventually some goods become more acceptable in making exchanges.
What is the wellspring of all US dollars?
The Federal Reserve and the banking system
What is liquidity?
How easily an asset can be converted to a spendable form
What are the parts of M1?
currency held outside banks, including checking accounts and traveler’s checks
How big is M1?
$3 Trillion
Why was the Fed created?
To be a lender of last resort to prevent banking crises.
T/F: The Fed’s early record was not good.
True; they caused a huge deflation that economists believe in the cause of the Great Depression.
T/F: If Congress wanted to end the Fed, they could refuse to fund it.
False; The Fed funds itself.
T/F: The President runs the Fed.
False- the board of 7 governors are appointed by the President for a 14 year term. The Chair is appointed for a 4 year term. All are confirmed by the Senate.
Who is the Federal Open Market Committee?
The board of governors, the president of the NY Federal Reserve bank, the presidents of all other 11 district banks, 4 of whom vote at each meeting on a rotating basis
Commodity money
has other uses
Fiat money
only used for money
