Objective 4

Question 1

Checkable deposits

Answer 1

Any demand deposit account against which checks or drafts of any kind may be written or quickly accessed such as via a debit card.

Question 2

Fiat money

Answer 2

Currency that a government declares legal tender, but is not backed by any physical asset. Its value is derived sole by its acceptability and supply and demand.

Question 3

Fractional reserve banking

Answer 3

A system in which a fraction of a bank’s deposits must be held in reserve for withdrawal; the rest of which is lent out to other parties.

Question 4

Required reserves

Answer 4

The minimum required that a bank must hold in reserve in volt cash or deposits and may not be lent out.

Question 5

Excess reserves

Answer 5

The reserves held by a bank in excess of the minimum required

Question 6

Monetary base

Answer 6

The sum of currency in circulation and deposits held by banks and other depository institutions.

Question 7

Federal funds rate

Answer 7

The interest rate at which depository institutions trade with each other of funds held in reserve at the Federal Reserve.