chapter 10

Question 1

anything that is used to determine value during the exchange of goods and services

Answer 1

medium of exchange

Question 2

the direct exchange of one set of goods or services for another

Answer 2

barter

Question 3

a means for comparing the values of goods and services

Answer 3

unit of account

Question 4

something that keeps its value if it is stored rather than spent

Answer 4

store of value

Question 5

coins and paper bills used as money

Answer 5

currency

Question 6

objects that havew value iin and of themselves and that are also used as money

Answer 6

commodity money

Question 7

objects that have value because the holder can exchange them for something else of value

Answer 7

representative money

Question 8

coined money, usually gold or silver, used to back paper money

Answer 8

specie

Question 9

objects that have value because a government has decreed that they are an acceptable means to pay debts

Answer 9

fiat money

Question 10

an institution for receiving, keeping, and lending money

Answer 10

bank

Question 11

a bank chartered by the federal government

Answer 11

national bank

Question 12

a widespread panic in which many people try to redeem their paper money at the same time

Answer 12

bank run

Question 13

a paper currency issued during the civil war

Answer 13

greenback

Question 14

a monetary system in which paper money and coins had the value of certain amounts of gold

Answer 14

gold standard

Question 15

a bank that can lend to other banks in time of need

Answer 15

central bank

Question 16

a bank that belongs to the federal reserve system

Answer 16

member bank

Question 17

the seizure of property from borrowers who are unable to repay their loans

Answer 17

foreclosure

Question 18

all the money available in the United States economy

Answer 18

money supply

Question 19

the ability to be used as, or directly converted into, cash

Answer 19

liquidly

Question 20

money in a checking account that can be paid out “on demand” or at any time

Answer 20

demand deposit

Question 21

a funs that pools money from small savers to purchase short-term government and corporate securities

Answer 21

money market mutual fund

Question 22

a banksinf system that keeps only a fraction of its funds on hand and lends out the remainder

Answer 22

fractional reserve banking

Question 23

failing to pay back a loan

Answer 23

default

Question 24

a specific type of loan that is used to buy real estate

Answer 24

mortgage

Question 25

a card entitling its owner to buy goods and services based on the owners promise to pay for those goods and services

Answer 25

credit card

Question 26

the price paid for the use of borrowed money

Answer 26

interest

Question 27

the mount of borrowed money

Answer 27

principal

Question 28

a card used to withdraw money from a bank account

Answer 28

debit card

Question 29

a person or institution to whom money is owed

Answer 29

creditor

Question 30

list and define the three uses of money

Answer 30

- medium of exchange - used to determine value - unit of account - comparing values - store of value - keeps it value

Question 31

list and briefly explain the six characteristics of money that economist use to judge how well an item serves as currency

Answer 31

- durability - withstand physical wear - portability - take with you - divisibility - divide to be smaller - uniformity - two must be the same - limited supply - rare in supply - acceptability - be able to access

Question 32

list the three types of money and explain the source of value of each

Answer 32

commodity money - objects that have value representative money - makes objects that have value because of holder fiat money - government decreed money

Question 33

what are the two main categories of money supply and how do they differ from each other

Answer 33

M1 - consist of assets that have liquidity | M2 - same but cannot be used as cash directly

Question 34

What is the advantage of fractional reserve banking and what is the risk of fractional reserve banking?

Answer 34

the advantage to the bank is that it enables the bank to make more profit form the interest it charges on loans. the advantage to borrowers ant the economy on general is that it stimulates growth in the economy, thus creating wealth and new jobs. the disadvantage is that of diminished safety to the bank and economy; the smaller the fraction that the bank keeps on hand the greater the risk of the bank if borrowers default on their loans, and to the economy if defaults cause a general panic, a run on the banks.

Question 35

anything that serves as a medium of exchange, a unit of account, and a store of value

Answer 35

money