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unit 6 study guide
| Question | Answer |
|---|---|
| What is money? | Anything generally accepted in exchange for goods and services. |
| List and define the functions of money? | Medium of exchange, Unit of account, Store of value |
| What are the characteristics of money? | Divisable, Portable, Durable, Scarce, Acceptability, Uniformly |
| List and explain the types of money- | --- |
| Commodity Money | Something used as money but also has its own use |
| Representative Money | Any medium of exchange printed or digital |
| Fiat Money | Federal reserve notes that are not backed up by anything but are legal tender must be accepted |
| Demand Deposit | Checking accounts savings money markets |
| Debit card | Plastic that deducts the amount from account |
| Credit Card | A loan that you agree to pay monthly |
| Token Money | Represents a greater value than its intrinsic value |
| Near monies | Has a cash value but cant be spent without cashing it in |
| What does the Bureau of engraving & printing create | American legal tender |
| What does the US mint create | Coins |
| What are some counterfeiting prevention measures the US takes with its fiat currency? | Color shifting ink, Security thread, watermark, 3D security ribbon, Micro printing |
| What is the money supply Also what is M1 vs. M2 | All the money available in our economy. M1 is a measure of money that includes currency like saving deposits. M2 includes cash, checking depositis and easily |
| When does inflation(aside from just being higher prices) occur? | Inflation occurs when there is too much money in circulation. |
| What are the functions of banks? | Store & save money and valuables, they loan money, mortgage, give credit and debit cards |
| What is monetary policy? | The actions undertaken by a central bank to manipulate the money supply and credit conditions to stimulate or restrain economic activity |
| How does the fed serve the government? | By acting as its fiscal agent managing government debt, and providing financial services |
| What services does the fed provide to banks? | Check clearing providing loans and regulating bank reserves |
| How does the fed regulate the banking system? | Through reserve requirements setting interest rates and supervising banks to ensure their solvency and stability |
| What is the required reserve ratio | Minimum percentage of customer deposits that the bank is required to keep on hand |
| What is a discount rate | The interest rate that a central bank charges commercial banks and other financial institutions when they borrow money directly from the central bank |
| What is an open market operations | The buying and selling of government securities in the open market by a central bank. |
| What is a tight contractionary monetary policy | Used when a central bank wants to slow down economic activity also to reduce inflation |
| What is easy expansionary monetary policy practice | Used when a central bank wants to boost economic activity especially during a slow down nor recession |
| What is a inside policy lag | How long it takes for the government or central bank to respond to a problem in the economy |
| What is a outside policy lag | The time it takes for a policy to actually affect the economy after it has been implemented |
Created by:
sydney miller!