Question
1. Which scenario demonstrates the function of money as a unit of account? If you don't go to the farmer's market today, you can save
1. Which scenario demonstrates the function of money as a unit of account?
If you don't go to the farmer's market today, you can save your money and buy something next week. | |
You can use money to buy bananas from the farmer's market. | |
The farmer's market has an account book that is denominated in US dollars. | |
If a banana costs twice as much as an apple at the farmer's market, it reflects the banana being twice as valuable. |
2.
What is one of the drawbacks of fiat money?
Because the value of money is tied to the store of commodities, inflation is limited. | |
Value is not based on quantities of commodities. | |
Because the value of money is not tied to any commodity, inflation is unrestrained. | |
In order to maintain value, large quantities of commodities must be maintained. |
3.
Select the 2 ways that monetary policy is enacted?
Buying or selling federal securities | |
Adjusting federal interest rates charged to commercial banks | |
Setting the interest rate for private loans | |
Buying foreign currency |
4.
One reason for fractional reserve banking is to prevent bank runs. True or false?
True | |
False |
5.
Select ALL of the statements which accurately describe the US banking system.
The Federal Reserve pays interest on reserve balances of commercial banks. The interest rate is called the IORB rate. | |
Commercial banks can borrow from the Federal Reserve to meet daily reserve requirements. | |
Commercial banks can lend to each other to meet daily reserve requirements. | |
Commercial banks are out of reach of regulation. |
6.
The larger the reserve ratio, the higher the amount of money created by the commercial banking system. True or fale?
True | |
False |
7.
What is the category of money for which the money itself is a commodity?
Commodity money | |
Commodity-backed money | |
Fiat money | |
Currency |
8.
Monetary policy is less likely to suffer from implementation lags. True or false?
True | |
False |
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