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Macro Economics 103 > Macro Economics Chapter 14 Power Point > Flashcards

Macro Economics Chapter 14 Power Point Flashcards

1
Q

What will I learn in this chapter?

A

The three functions of money, definitions of money, and organization and services of the Federal Reserve System.

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2
Q

What is barter?

A

The direct exchange of one good for another good, rather than for money.

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3
Q

What is the problem with barter?

A

It requires a coincidence of wants.

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4
Q

What is money?

A

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

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5
Q

What is the advantage of money?

A

The use of money simplifies and therefore increases market transactions.

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6
Q

What are the functions of money?

A

•Medium of exchange•Unit of account•Store of value

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7
Q

What is a medium of exchange?

A

The primary function of money to be widely accepted in exchange for goods and services.

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8
Q

What is a unit of account?

A

The function of money to provide a common measurement of the relative value of goods and services.

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9
Q

What is a store of value?

A

The ability of money to hold value over time.

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10
Q

What does it mean that money is liquid?

A

It is available to spend in exchange for goods and services without any additional expense.

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11
Q

Are credit cards money?

A

No, credit cards fail to meet the store-of-value criterion and are therefore not money.

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12
Q

What is the best level of scarcity for money?

A

The supply of money must be great enough to meet ordinary transactions needs, but not be so plentiful that it becomes worthless.

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13
Q

What are other properties of money?Money must be …

A

•portable•divisible•uniform•acceptable

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14
Q

What is commodity money?

A

Anything that serves as money while having market value in other uses.

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15
Q

Is our money backed up by gold or silver?

A

No, our paper money was exchangeable for gold until 1934, and in 1963 Congress removed the right to exchange $1 bills for silver.

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16
Q

What is fiat money?

A

Money accepted by law and not because of redeemability or intrinsic value.

17
Q

What makes our dollar bills fiat money?

A

All our bills claim that “This note is legal tender for all debts public and private”

18
Q

What does legal tender mean?

A

Legally dollar bills cannot be refused as payment for a debt.

19
Q

What is M1?

A

The narrowest definition of the money supply. It includes currency, traveler’s checks, and checkable deposits.

20
Q

What is currency?

A

Money, including coins and paper money.

21
Q

What are checkable deposits?

A

The total of checking account balances in financial institutions convertible to currency “on demand” by writing a check without advance notice.

22
Q

What is M2?

A

The definition of the money supply that equals M1 plus near monies, such as savings deposits and small time deposits of less than $100,000.

23
Q

What distinguishes M1 from M2?

A

M1 is more liquid than M2.

24
Q

What is the Federal Reserve System?

A

The 12 Federal Reserve district banks that service banks and other financial institutions within each of the Federal Reserve districts.

25
Q

What is the Board of Governors of the Fed?

A

The seven members appointed by the President and confirmed by the U.S. Senate.

26
Q

How long do board members serve?

A

They serve for a non-renewable fourteen-year term.

27
Q

What is the responsibility of the board?

A

To supervise and control the money supply and the banking system of the U.S.

28
Q

What is the chairman of the Board of Governors?

A

The President designates one member of the Board to serve as chair for a renewable four-year term.

29
Q

Who is Ben Bernanke?

A

Chairman of the Board of Governors of the Fed.

30
Q

What is the Federal Open Market Committee (FOMC)?

A

The FOMC is the Fed’s committee that directs the buying and selling of U.S. government securities.

31
Q

What is the purpose of the FOMC?

A

To increase the money supply if we have unemployment and decrease it if we have inflation.

32
Q

What is the Federal Advisory Council?

A

12 prominent commercial bankers who advise board members, but who do not have voting rights.

33
Q

What percent of all deposits reside in member banks?

A

About 70%

34
Q

What does a Federal Reserve Bank do?(6 actions)

A

•Controls the money supply•Clears checks•Supervises and regulates banks•Maintains and circulates currency•Protects consumers•Maintains federal government checking accounts and gold

35
Q

What is the Federal Deposit Insurance Corporation (FDIC)?

A

The FDIC is a government agency established in 1933 to insure commercial bank deposits up to a specified limit.

36
Q

What is the Monetary Control Act?

A

A 1980 law that gave the Fed greater control of nonmember banks and makes all financial institutions more competitive.

37
Q

What is the Financial Services Modernization Act?

A

A 1999 law that allows banks, securities firms, and insurance companies to merge.

Macro Economics 103 (47 decks)

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