Money/Banker

Question 1

define money

Answer 1

anything of value used to buy or sell goods and services

Question 2

three characteristics of money

Answer 2

unit of account
store value
medium of exchange

Question 3

store value

Answer 3

money is whatever it is today forever

Question 4

medium of exchange

Answer 4

is the physical characteristics of money

Question 5

unit of account

Answer 5

the characteristics of money that allows you to compare post prices

Question 6

currency

Answer 6

is the most liquid form of money
dollar bills, coins, cash, checking accounts (M1)

Question 7

debit cards included in M1 or M2

Answer 7

M1

Question 8

credit cards included in M1 or M2

Answer 8

neither

Question 9

liquidity

Answer 9

how easy it is to exchange an asset for cash (cash value) conversion of any asset for cash

Question 10

formula to find total money supply

Answer 10

final money = initial deposited money x money multiplier

Question 11

money multiplier formula

Answer 11

1/R
R(reserve ratio)

Question 12

what happens to the money supply when you deposit into a depository

Answer 12

nothing because depositories only hold your money they do not do loans

Question 13

how federal reserve can increase the money supply

Answer 13

buy bonds (most important)
lower interest rates (second)
lower reserve ratio (third)

Question 14

federal funds rate

Answer 14

banks can charge other banks

Question 15

discount rate

Answer 15

federal reserve charges to lend to banks

Question 16

roles of federal reserve

Answer 16

regulate inflations
regulate the banking industry

Question 17

how does inflation cause there to be a second tax on your money?

Answer 17

-menu cost
-shoe leather costs
-tax induced inflation

Question 18

menu cost

Answer 18

constantly changing your prices to keep up w prices

Question 19

shoe leather costs

Answer 19

constantly going to the bank to take money out; BC you need more money bc inflation is increasing

Question 20

tax induced inflation’

Answer 20

two counties at the same interest rate; inflation rate in one country is different; the nominal interest rate will be different (nominal interest rate = real interest rate + inflation rate); then they charge the same tax; interest rate after taxes is = real interest rate - tax, which will be different

Question 21

M1

Answer 21

-currency → bills, coins
-demand deposit → checking account
-money orders
-travelers checks

Question 22

M2

Answer 22

-savings accounts → limitations of transactions per month
-money market account → a type of savings account that buys low risk “safe” short term bonds with it for better interest