Money and Banking

Question 1

A designation given to most money that means it has to be accepted in payment of debts

Answer 1

Legal Tender

Question 2

M1 and M2 are used to measure this

Answer 2

Money Supply

Question 3

This function occurs when the fed helps banks with a check drawn on another banks deposits

Answer 3

clearing house

Question 4

This group is appointed by the president and runs the Federal Reserves

Answer 4

Board of Governors

Question 5

This desirable characteristic of money allows it to be easily carried

Answer 5

portable

Question 6

Set by the fed, this establishes the percentage of deposits a bank must keep in reserves, it is also one of the tools of monetary policy

Answer 6

Reserve Requirement

Question 7

Something that is owed to another person

Answer 7

debt

Question 8

This banking system allows banks to keep only a portion of their deposits on account

Answer 8

Fractional Reserve System

Question 9

The relationship between the size of the money supply and interest rates

Answer 9

inverse

Question 10

This desirable characteristic of money means that it will last for awhile

Answer 10

durable

Question 11

These are created by banks and make up approximately 80% of M1

Answer 11

demand deposits

Question 12

The amount a bank has above their required reserves, banks can safely lend this out

Answer 12

excess reserves

Question 13

Conducted by the fed, this invokes changing the money supply in order to influence interest rates and thus economic spending

Answer 13

monetary policy

Question 14

money performs this function when you put it in a piggy bank so you can save up to buy a new sweater

Answer 14

store of value

Question 15

Any identifiable item that is widely accepted for the purchase of goods and services

Answer 15

money

Question 16

This is the US’s central bank and consists of twelve banks scattered around the nation

Answer 16

federal reserve system

Question 17

The official name for the US’s currency

Answer 17

federal reserve notes

Question 18

This type of money would still be desired even if it stopped being used for money

Answer 18

commodity money

Question 19

banks can do this when they loan money

Answer 19

create money

Question 20

One of the tools of monetary policy, it involved the fed buying or selling bonds

Answer 20

open market operations

Question 21

The amount that the Federal Reserves say they must keep

Answer 21

required reserves

Question 22

Money performs this function when you use it to buy a sweater

Answer 22

medium of exchange

Question 23

money is performing this function when you use it to compare the price of two sweaters

Answer 23

measure of value

Question 24

This formula determines the potential increase in the money supply which can result from the addition of new reserves into the banking system

Answer 24

money multiplier

Question 25

the interest rate the fed charges member banks to borrow from it, the fed will use this to carry out monetary policy

Answer 25

discount rate

Question 26

the only reason it has value is because it is money, otherwise it would be worthless

Answer 26

fiat money

Question 27

A measure of how easy it is to turn an asset into cash

Answer 27

liquidity

Question 28

something of value you own

Answer 28

asset

Question 29

This desirable characteristic of money refers to the idea that it all looks the same

Answer 29

uniform

Question 30

This desirable characteristic of money is key to it retaining its value

Answer 30

scarce