chapter 9, what money is good for

Question 1

anything that is generally accepted as a means of payment

Answer 1

money

Question 2

three functions of money

Answer 2

to be a medium of exchange
to provide a measure of value
to provide a store of value

Question 3

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

Answer 3

barter

Question 4

six qualities that money should possess

Answer 4

portability
durability
homogeneity
divisibility
constancy
intrinsic valuableness

Question 5

use this term to refer to coined, metallic money

Answer 5

specie

Question 6

lowering the quality and value of coins

Answer 6

debased

Question 7

the asserted value

Answer 7

face value

Question 8

when people cannot trust the value of a form of money, they will save for themselves forms of money that seem more stable and valuable

Answer 8

gresham’s law

Question 9

when the level of prices in the market rises because too much money is in circulation

Answer 9

inflation

Question 10

if prices decrease because money seems more valuable and stable

Answer 10

deflation

Question 11

any form of money that has been declared a valid means of payment

Answer 11

legal tender

Question 12

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

Answer 12

bullion

Question 13

a system which allows banks to hold less than 100 percent of deposits in reserve

Answer 13

fractional reserve banking

Question 14

legal tender that is backed by nothing but a government’s promise

Answer 14

flat money

Question 15

three main categories of money supplies

Answer 15

M1, M2, M3

Question 16

assets that can be easily converted into M1 because they are highly liquid

Answer 16

near-monies

Question 17

is the source of part of the American money supply

Answer 17

united states department of the treasury

Question 18

what network is the majority of americas money supply under the control of

Answer 18

federal reserve system

Question 19

duty is to operate america’s banking system

Answer 19

board of governors

Question 20

makes decisions regarding the buying and selling of government securities, such as treasury notes, bills, and bonds

Answer 20

federal open market comittee

Question 21

influences the policies of the private commercial banks with which you are familiar with

Answer 21

federal reserve banks

Question 22

three main tools that the federal reserve is able to increase or decrease the amount of money in circulation

Answer 22

open market operations
reserve ratios
discount rates

Question 23

a period, usually six months or longer, during which the economy recedes, or declines

Answer 23

recession

Question 24

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

Answer 24

monetarism

Question 25

20th century economist associated with monetaris

Answer 25

milton friedman