Money and Banking

Question 1

Characteristics of Money

Answer 1

Portability: Easily transfered
Durability: Lasts when handled
Divisibility: into smaller units

Question 2

Federal Reserve System

Answer 2

Nations first central bank

Board of Governor of the Fed- The governing body of the Federal system

Question 3

Federal Open Market Committee

Answer 3

12 Member policy-making group within the fed. Conduct Open Market Operations

Question 4

Major Duties of the Fed

Answer 4

Controlling money supply
supplying the economy with paper money
holding bank reserves
providing check clearing services
supervising member banks
lender of last resort

Question 5

Interest

Answer 5

Payment you recieve for allowing a bank to use your money

Question 6

Interest Rate

Answer 6

Fee charged for borrowing money
Low interest rates increase consumer and commercial borrowing
Used as a tool to stimulate the economy
Banks and finance companies make profits by charging interest rates
higher rate= more profit for lender

Question 7

Functions of Money

Answer 7

Medium of Exchange: Accepted by all parties
Measure of Value: express worth in terms most people understand
Store of Value: Purchasing power to be saved until needed