Chapter 10 Section Reviews Flashcards Preview

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Flashcards in Chapter 10 Section Reviews Deck (18):
1

What term implies that a merchant must accept in the payment of debts whatever the government declares to be money?

Legal Tender

2

What three functions does money serve?

A means of payment for goods and services

A measure of value

A means of storing purchasing power.

3

 

What characteristics should an effective monetary system possess?

Convenience

Portability

Divisibility

Durability

Stability

4

 

What are the three kinds of money that can circulate in an economy?

Commodity Money

Representative money

Fiat Money

5

Name the two measures of the money supply discussed in your book and list what each includes

M-1 - Comprises paper currency, coins, traveler's checks, and checking accounts. 

M-2 - Comprises variety of savings accounts and M-1

6

 

What does it mean to say that the United States has a dual banking system?
 

There are banks regulated by state charters and banks regulated by national charters. 

7

What are the three functions of commercial banks?

Accepting deposits

Extending loans.

Providing miscellaneous services

8

 

Which type of thrift usually originates with a group of people who have something in common (usually employment)?

Credit Union

9

Give an example of a contractual saving institution

insurance companies

pension funds

10

Name an advantage and a disadvantage of the traditional money used on the Yap Islands

Advantages: very easily identifiable and hard to steal

Disadvantage: Lack of portability, convenience, divisibility

11

 

How does money act as a store of purchasing power?

By keeping it face value, money can be received and exchanged for something at one time and for something comparable value at a later time. 

12

Which characteristic of money do you consider most important and why?

  • Answers will vary
    • Convenience
    • Portability
    • Divisibility
    • Durability
    • Stability

13

Are today’s U.S. coins full-bodied or token coins? Explain your answer

They are token coins because the metal in them is of less value than their face value. 

14

 

What is the name given to unbacked money when it is issued by governmental decree?

Fiat Money

15

 

What two factors keep a fiat monetary system functioning?

Faith that others will accept the money, we have accepted,

limited quantity of that money 

16

 

What type of money does the United States currently use?

Fiat Money

17

Why can commercial banks also be referred to as full-service banks? Give examples in your answer

  • They offer a wide range of services to their customers.
  • Examples: They offer
    • Checking and savings accounts
    • Personal and saving loans
    • Getting debit and credit cards
    • Making investments. 

18

 

For what economic position was Milton Friedman a leading spokesman, and what did that position see as the principal cause for inflation?

He advocated the monetarist approach and the money supply.