exam 1

Question 1

who is responsible for the trend or long-run behavior of the money supply

Answer 1

Central Bank

Question 2

who is the central bank in the United States

Answer 2

The Federal Reserve System

Question 3

what do the feds do

Answer 3

monetary policy

Question 4

refers to the management of the money supply and interest rates

Answer 4

monetary policy

Question 5

money supply increases more rapidly than the output of good and services

Answer 5

inflation

Question 6

a continuing decline in prices and is more damaging to a nations economic health than inflation

Answer 6

deflation

Question 7

what is a claim on the issuer’s future income or assets

Answer 7

security

Question 8

what is a debt security that promises to make payments periodically for a specified period of time?

Answer 8

bond

Question 9

the cost of borrowing or the price paid for the rental of funds. These are determined by market forces of supply and demand

Answer 9

interest rate

Question 10

appreciation causes:

Answer 10

• higher prices to foreign buyers of exports
• lower prices to domestic consumers of imports
• a trade deficit

Question 11

Depreciation causes:

Answer 11

• lower prices to foreign buyers of exports
• higher prices to domestic consumers o imports
• a trade surplus

Question 12

institutions that borrow funds from people who have saved and make loans to other people

Answer 12

financial intermediaries

Question 13

institutions that accept deposits and make loans

Answer 13

banks

Question 14

government spending and taxation

Answer 14

fiscal policy

Question 15

anything that is generally accepted in payment for goods or services or in the repayment of debts: a stock concept

Answer 15

Money

Question 16

the total collection of pieces of property that serve to store value (assets less liabilities)

Answer 16

Wealth

Question 17

flow of earnings per unit

Answer 17

Income

Question 18

the direct exchange of goods and services which is how exchange occurs when there is no money

Answer 18

Barter

Question 19

problems of barter exchange:

Answer 19

• requires a double coincidence of wants
• multiple prices for each good
• can be difficult to store wealth

Question 20

the way funds are transferred to sellers of goods and services

Answer 20

payments system

Question 21

how easily and costly an asset can be converted for money

Answer 21

Liquidity

Question 22

the total amount of money in the economy

Answer 22

money supply

Question 23

measures of the money supply

Answer 23

monetary aggregates

Question 24

the primary measure of the money supply. Consists of currency in circulation, checkable deposits, and nonbank traveler’s checks

Answer 24

M1

Question 25

savings deposits, small time deposits, and retail money-market mutual funds

Answer 25

M2

Question 26

the transfer of funds out of the m1 measure of money to MMDAs to avoid reserve requirements

Answer 26

sweep programs

Question 27

the use of another country’s currency to replace the domestic currency

Answer 27

dollarization

Question 28

a group of countries adopt a common currency

Answer 28

currency union